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arXiv · 2607.23874

The Tiered Clinching Auction with Applications to Carbon Offset Markets

Tessa Davis·Agnès Totschnig·Adrian Vetta
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Abstract

Voluntary carbon offsetting is a strategy which has been pursued globally by corporations to reduce their effective carbon emissions. Carbon offset markets currently suffer from low liquidity: offsets are highly heterogeneous, the landscape of accreditation is fragmented, and the market lacks a centralized trading infrastructure which would provide clear demand and price signaling to producers and buyers of offsets. In this paper, we propose an ascending auction mechanism which can be applied to the sale of carbon offsets. It generalizes Ausubel's clinching auction to a setting with items of tiered quality. The central idea behind the clinching mechanism is that bidders are allocated items when their opponents' demand drops below the supply. This is generalized to multiple nested submarkets where clinching can occur in the tiered case. Assuming that bidders have a minimum quality level that they will accept but are indifferent to quality beyond that, along with having decreasing marginal utility, we obtain that the auction generates the efficient outcome and charges VCG prices. As a result, sincere bidding is a weakly dominant strategy given private values. Moreover, the auction can be implemented in polynomial time. Beyond offset markets, this auction can be applied to any market where items can be ordered on a scale and bidders have a cutoff point for desiring items on the scale, such as hotel room bookings, concert ticketing and sponsored search auctions.

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Tessa Davis, Agnès Totschnig, Adrian Vetta. 2026-07-26. The Tiered Clinching Auction with Applications to Carbon Offset Markets. https://arxiv.org/abs/2607.23874

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