Group rewards and individual sanctions in environmental policy

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Group Rewards and Individual Sanctions in Environmental Policy SummaryWe examine an incentive scheme for a group of agents, where all agents are rewarded if the group meets its target. If the group does not meet its target, only the agents that meet their individual target are rewarded. In environmental policy, the EU burden sharing agreement and the UK Climate Change Agreements feature this incentive scheme. There is only a difference in outcome between group and individual rewards if emissions are stochastic. Group rewards generally lead to higher expected emissions than individual rewards. The attraction of the group reward scheme may lie in its fairness and its tough-looking targets.

An analysis of the economic determinants of energy efficiency in the European iron and steel industry

“…Overview of mainly relevant historical energy efficiency related policies (1990e2010). Source: Own compilation based on (Chidiak, 2000), (RWI, 2011), (Dijkstra and Rübbelke, 2013). 18 Already in response to the 1996 commitments, the German government declared that it will prefer private sector initiatives to governmental regulations (RWI, 2011).…”

“…The CCAs continued for those sectors and activities not covered by the EU ETS (for a more comprehensive description of CCAs, CCL and UK ETS see, e.g. (Dijkstra and Rübbelke, 2013)). …”

The Use of Group-Level Approaches to Environmental and Natural Resource Policy

“…The incentives to free-ride can be reduced or eliminated if firm-level decisions or outcomes are observable so that "good" actors can be distinguished from "bad" actors. example, if a regulator threatens to impose a tax or regulation on an entire industry for failure to self-regulate emissions, the regulator could provide some tax or regulatory relief to individual firms that can demonstrate sufficient reductions in their own emissions (e.g., Dijkstra and Rubbelke 2013). Similarly, when self-regulation leads to reputational gains, free-riding can be reduced if firms within an industry realize those gains only when they have demonstrated through an external "certification" process that they are environmental stewards (Kotchen and van 't Veld 2011).…”

Group Incentives for Environmental Protection and Natural Resource Management

“…For example, improved monitoring to allow payments to vary with individual contributions has been suggested as a means for addressing the nonpoint source pollution problem (e.g.,Xepapadeas 2011, Palm-Forster, et al 2019, Balmford et al 2021. Policies that allow firms to avoid the negative consequences of group failures through their individual effort have also been used to reduce greenhouse gas emissions (e.g.,Dijkstra & Rübbelke 2013). For studies comparing individual versus collective payments, seeNarloch et al (2012),Midler et al (2015),Gatiso et al (2018), andMoros et al (2019).6 For general discussions of tournaments and related contests, see, e.g.,Lazear & Rosen (1981),Holmstrom (1982),Nalbantian & Schotter (1997),Prendergast (1999),Che &Yoo (2001), andConnelly et al (2014).…”