Kerri Brick, EfD research fellow, and Martine Visser, EfD research fellow and coordinator, presented a paper at the Putting a Price on Carbon Conference, held in Cape Town on 23 and 24 March, 2010. The purpose of the conference was to build on the discussions undertaken at a side-event at the 2009 Climate Change Summit where Brick and Visser also presented a paper.
The paper presented by Brick and Visser explores meeting a national emission reduction target in an experimental setting.
In this paper, the authors use a one-shot public goods framework with heterogeneous groups and a climate change framing to analyse the public good-dichotomy between social welfare and individual incentives.
A variant of the standard Voluntary Contribution Mechanism (VCM) is used to examine the cooperative behaviour of different player-types in meeting a national emission reduction target when players can invest in mitigation or continue with business-as-usual. The experiment consists of 4 treatments: the standard VCM, a VCM with communication opportunities and two VCM variants which specify minimum contributions to the public good and sanction free-riding.
The paper concludes that voluntary cooperation results in insufficient cooperation in the context of meeting a national target. With the introduction of communication, cooperation is significantly improved, indicating that stakeholder participation is important in facilitating compliance. In the context of taxation, when the frequency of free-riding is high, taxation improved cooperation. Conversely, amid high levels of cooperation, taxation dampened cooperative behaviour as subjects focused on the Nash equilibrium.