European governments should auction most of the permits in the Union's carbon dioxide emissions trading scheme, according to research by Oxford academics, writes Scheherazade Daneshkhu.

A study co-authored by Robert Ritz of Nuffield College, to be presented to the Royal Economic Society's annual conference next week, said the plan to auction up to 10 per cent of the allowances in 2008-2012, with the rest distributed to companies free, amounted to a substantial subsidy.