Abstract
The objective of this paper is to show the importance of incentivized laboratory experiments in the analysis of people’s propensity towards sustainability and in evaluating environmentally friendly investments. We discuss the application of a laboratory experiment to environmental regulation. In particular, we analyse the emission trading scheme (ETS) with reference to the aviation sector. In the laboratory, we test the propensity of firms to purchase permits to emit CO2 and to change their production technology. We consider a realistic framework by identifying a maximum limit of emissions established by the regulator, offering the opportunity to firms to change the initial (highly pollutant) technology. We first carry out a non-incentivized pilot experiment. Afterwards, we run an incentivized experiment. This paper shows that experiments are a valid policy support instrument, but their correct design is topical for its performance.
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- 1.
For instance, Morone et al. (2018) studied food waste with a natural experiment comparing waste production when food is consumed individually with a situation in which it is consumed in group. In transport, experiments have highlighted the trade-off between parking availability and costs, in terms of time savings and have supported the design of parking policies with respect to tariffs, investments and regulation (Bergantino et al. 2015).
- 2.
For instance, Ewing and Sarigöllü (2000) apply it to the choice between different types of vehicles, according to the type of fuel. From their results, the strategies of intervention are evaluated in their effectiveness and are taken in consideration to design policies for a greater diffusion of green innovations.
- 3.
The number of flights performed globally by the airline industry has been steadily increasing since the early 2000’s and is expected to reach 39.4 million in 2019. This figure is over one million higher than the prediction for the previous year and represents an increase of over 50 percent from a decade prior (https://www.statista.com/statistics/564769/airline-industry-number-of-flights/).
- 4.
For greater details on the EU legislation on ETS please see other chapters in the Book and in particular Bergantino and Loiacono (2019).
- 5.
Data from the official website of the European Commission, session: Energy, Climate change, Environment in EU Actions. https://ec.europa.eu/clima/policies/ets_en.
- 6.
Ibid.
- 7.
For greater details on the ETS the reader is referred to: https://ec.europa.eu/clima/policies/ets_en.
- 8.
Each bidder has a randomly determined private value for one unit of a good. The auction price ticks up at regular intervals, and a bidder can drop out at any time. The auction ends when the number of remaining bidders equals the number of items. Each of these remaining bidders receives one item, and pays the ending price.
- 9.
We implemented a price increase by 10 ECUs in the auction to discourage any situation where subject was indifferent between purchasing an additional permit or not.
- 10.
We conducted a One-way ANOVA with the data of the pilot experiment to determine if there was a difference in the grouping of the odd period between the first periods (First periods = 4, Last periods = 3) or between the last periods (First periods = 3, Last periods = 4).The result determined by one-way ANOVA (F (3, 12) = 1.47, p = 0.2711) shows that there was no difference between the two groupings and we can avoid the segmenting for each period.
- 11.
Separating the probit analysis for the 4 treatments and analysing the individual period, we find that the learning effect is maximum in the case of a homogeneous industry under myopic regulation, where the probability of investing in the last period is about 90% higher than the first period. There is no increase in investments during the periods only for a heterogeneous industry under a non-myopic regulator.
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Armenio, S., Bergantino, A.S., Morone, A. (2020). Can Laboratory Experiments Help in Evaluating Emission Trading Schemes? A Pilot Experiment on Aviation Allowances: Lessons to Be Learned. In: Walker, T., Bergantino, A.S., Sprung-Much, N., Loiacono, L. (eds) Sustainable Aviation. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-28661-3_11
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