Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 1997:5: Emission Quota Trade among the Few: Laboratory Evidence of Joint Implementation among Committed Countries The Complete Version

Peter Bohm and Björn Carlén ()
Additional contact information
Peter Bohm: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Björn Carlén: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: The purpose of the laboratory tests reported here is to identify a well-functioning design, tailored for an upcoming unique experiment using real-world relevant decision makers for carbon emission reduction trade among four countries committed to binding carbon emission limits, a form of so-called joint implementation. For reasons given in the paper, the design is required to promote high trade efficiency and a small scope for arbitrage. All designs tested reached high levels of efficiency (87-99%), which is noteworthy given the small number of traders. Attempts to adjust design to reduce or eliminate arbitrage were successful in the final test rounds.

Keywords: carbon emission reduction trade; joint implementation; experimental economics

JEL-codes: A23; Q28

38 pages, May 6, 1998

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