ICES Seminar in Experimental Economics and Game Theory
Experiments on International Cooperation in Climate Change Mitigation
Friday, October 25, 2024 12:00 PM to 1:00 PM EDT
Vernon Smith Hall (formerly Metropolitan Building), 5183
The ICES Seminar in Experimental Economics and Game Theory of the Fall 2024 semester will feature:
University of Alabama
Experiments on International Cooperation in Climate Change Mitigation
Abstract
Despite worsening climate change, the international community still disagrees on how to divide the costs of mitigation between developing countries and developed countries, which emitted the bulk of historical carbon emissions. We study this issue using an economic experiment. Specifically, we test how information about historical emissions influences how much participants pay for climate change mitigation. In a four-player game, participants are assigned to lead two fictional countries as members of either the first or the second generation. The first generation produces wealth at the expense of greater carbon emissions. The second generation inherits their predecessor’s wealth and negotiates how to split the climate change mitigation costs. Here we show that when the second generation knows that the previous generation created the current wealth and mitigation costs, participants whose predecessor generated more carbon emissions offered to pay more, whereas the successors of low-carbon emitters offered to pay less.
However, can climate accords based on decentralized and voluntary agreements successfully reduce carbon emissions? We designed an economic experiment to study the effectiveness of the best-known mechanisms to foster international cooperation on climate change mitigation: climate pledges, financial penalties, and peer evaluation. We test each mechanism both separately and together. In the climate pledge treatments, participants could pledge their desired emissions target, approved by majority vote. In the treatments with financial penalties, failure to meet pledges triggered monetary sanctions. In the peer evaluation treatments, participants could evaluate each other, which determined who would receive an additional nonmonetary environmental prize. We find that most participants joined climate agreements and met their pledges, but pledges were insufficiently ambitious. As a result, neither pledges, financial penalties, nor peer evaluation reduced emissions. These results question the effectiveness of decentralized and voluntary climate agreements, such as the Paris Agreement.
For more information about the Seminar Series, please visit the Seminar Schedule homepage.
