Auctioning

A method of emissions permits allocation in a cap-and-trade system.  Permits are allocated to emitters on the basis of an auction system, in which the highest bidder receives the permits.  Auctioning speeds up the process of allowing the market to determine the cost of carbon.  It may also avoid some of the problems associated with other emissions permit allocation schemes, such as rent-seeking or undue special interests influence.  It is contrasted with grandfathering -- the allocation of allowances based on existing emissions.

Further reading: Peter Orszag, former director of the Congressional Budget Office and current Director of the Office of Management and Budget, "Climate Change Economics," Washington Post, 9 July 2008