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Silvester van Koten Loyola de Palcio Chair European University Institute, Florence Experimental Energy  Economics Presenting results of Van Koten, S. “ Do Emission Trading Schemes Facilitate Efficient Abatement Investments? An Experimental Study .”
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1. Theoretical Physics
2. Bridge model experimentation
3. Bridge
1. Theory 2. Engineering 3. Implementation Theoretical Physics Bridge Experimentation Bridge Theoretical Economics Market  Experimentation Experimental & Computational Economics Competitive Market E.g.,  Energy Market
 
 
 
 
2020: 20% decarbonization 2050: 80% decarbonization
2mT 4mT 5mT A B C Emission:
2mT 4mT 5mT 8m $ 20m $ 100m $ A B C Emission : Profit: 4$/T 5$/T 20$/T Abatement cost:
7m $ 2mT 8m $ 20m $ 100m $ A B C Emission : Profit: 4$/T 5$/T 20$/T Abatement cost: 1$/T Abatement Investment 1mT 7$/T 5mT 4mT
Emission: Profit: Abatement cost: Abatement Investment A B C ?
Pollution: Profit: Abatement cost: Abatement Investment A B C
A B C Competition for  permits EMISSION PERMIT MARKET
Does this work?
Economist as experimenter
Run experiments A B C EMISSION PERMIT MARKET Competition for  permits
YES NO NO NO NO (28) NO (8) NO (16) NO (18) Me … YES YES ( ∞ ) Massive Overinvestment PAY: Overinvestment FREE: Underinvestment Overinvestment Close to optimum PAY: Overinvestment FREE: Underinvestment Results Learning Possible? Thick Market? Gangadharan et al. 2005 Betz & Gunnthors-dottir (2009) Grimm et al.  (2010). Camacho-Cucna et al. (2011)
 
Every round a subject produces 3 units and needs 3 permits Technology Choice Reduction Cost 0 0 0 1 30% 1 2 50% 3 3 80% 9 Permit price Optimal technology choice 1 0 2 1 3 1 4 2 5 2 6 2 7 3 8 3 9 3
The new state-of-the-art LEE  Laboratory ( www.vse-lee.cz )
Falling error rate Below 10%! No significant difference between PAY and FREE
No significant over or under- abatement Allocation FREE PAY Optimal abatement technology 1 2 1 2 Period 1-5 + Over-abatement  - Under-abatement + 2 - 2 + 4 - 6   + 4 - 4   + 5 - 5   (N) (16) (20) (16) (20)
Learning possible? ,[object Object],[object Object],[object Object],Thick Market? Camacho-Cucna et al. (2011) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],NO YES NO YES
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Questions?
Silvester van Koten Loyola de Palcio Chair European University Institute, Florence Experimental Energy  Economics Presenting results of Van Koten, S. “ Do Emission Trading Schemes Facilitate Efficient Abatement Investments? An Experimental Study .”

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Slvstr eee pricing_carbon

  • 1. Silvester van Koten Loyola de Palcio Chair European University Institute, Florence Experimental Energy Economics Presenting results of Van Koten, S. “ Do Emission Trading Schemes Facilitate Efficient Abatement Investments? An Experimental Study .”
  • 2.
  • 3.
  • 4.
  • 6. 2. Bridge model experimentation
  • 8. 1. Theory 2. Engineering 3. Implementation Theoretical Physics Bridge Experimentation Bridge Theoretical Economics Market Experimentation Experimental & Computational Economics Competitive Market E.g., Energy Market
  • 9.  
  • 10.  
  • 11.  
  • 12.  
  • 13. 2020: 20% decarbonization 2050: 80% decarbonization
  • 14. 2mT 4mT 5mT A B C Emission:
  • 15. 2mT 4mT 5mT 8m $ 20m $ 100m $ A B C Emission : Profit: 4$/T 5$/T 20$/T Abatement cost:
  • 16. 7m $ 2mT 8m $ 20m $ 100m $ A B C Emission : Profit: 4$/T 5$/T 20$/T Abatement cost: 1$/T Abatement Investment 1mT 7$/T 5mT 4mT
  • 17. Emission: Profit: Abatement cost: Abatement Investment A B C ?
  • 18. Pollution: Profit: Abatement cost: Abatement Investment A B C
  • 19. A B C Competition for permits EMISSION PERMIT MARKET
  • 22. Run experiments A B C EMISSION PERMIT MARKET Competition for permits
  • 23. YES NO NO NO NO (28) NO (8) NO (16) NO (18) Me … YES YES ( ∞ ) Massive Overinvestment PAY: Overinvestment FREE: Underinvestment Overinvestment Close to optimum PAY: Overinvestment FREE: Underinvestment Results Learning Possible? Thick Market? Gangadharan et al. 2005 Betz & Gunnthors-dottir (2009) Grimm et al. (2010). Camacho-Cucna et al. (2011)
  • 24.  
  • 25. Every round a subject produces 3 units and needs 3 permits Technology Choice Reduction Cost 0 0 0 1 30% 1 2 50% 3 3 80% 9 Permit price Optimal technology choice 1 0 2 1 3 1 4 2 5 2 6 2 7 3 8 3 9 3
  • 26. The new state-of-the-art LEE Laboratory ( www.vse-lee.cz )
  • 27. Falling error rate Below 10%! No significant difference between PAY and FREE
  • 28. No significant over or under- abatement Allocation FREE PAY Optimal abatement technology 1 2 1 2 Period 1-5 + Over-abatement - Under-abatement + 2 - 2 + 4 - 6   + 4 - 4   + 5 - 5   (N) (16) (20) (16) (20)
  • 29.
  • 30.
  • 32. Silvester van Koten Loyola de Palcio Chair European University Institute, Florence Experimental Energy Economics Presenting results of Van Koten, S. “ Do Emission Trading Schemes Facilitate Efficient Abatement Investments? An Experimental Study .”