Economic Experiment on Climate Protection – Inequality Between Countries Undermines Collective Willingness for Climate Protection

Disastrous climate damage, like a disruption of the Gulf Stream or the melting of the polar ice caps, is to be avoided. The international community of states agrees on this goal. It remains to be seen if and how this goal can be reached. The inequality between countries regarding their historic greenhouse gas emissions and their economic performance reduces their willingness to cooperate. These are the findings of an economic experiment with 240 participants which was conducted as part of a study by the Centre for European Economic Research (ZEW)in Mannheim in cooperation with Heidelberg University, the London School of Economics and Universitat Autònoma de Barcelona. A comprehensive article on the study’s findings can be found in the latest issue of the renowned periodical "Proceedings of the National Academy of Sciences".

At climate negotiations in Copenhagen and Cancun, the participating countries agreed on limiting the global temperature rise to two degrees Celsius to avoid a disastrous climate change. It remains to be seen how this goal is to be reached. In order to limit the temperature rise, greenhouse gas emissions must be reduced. This leads to costs for the participating countries and it is uncertain what share of the expenses each country has to pay for. Within the international climate negotiations, there are demands that all expenses should be distributed equally between the countries. It is claimed that industrialised countries were richer than developing countries and therefore could bear higher costs. Due to their high historic greenhouse gas emissions, they had a special responsibility to find a solution for the problem. A group of researchers at the head of the Centre for European Economic Research (ZEW) in cooperation with Heidelberg University, the London School of Economics and Universitat Autònoma de Barcelona used an economic experiment to find out how the inequality between countries affects the willingness for a joint climate protection. ZEW researcher Dr. Astrid Dannenberg who is responsible for the experiment comments on the experiment’s significance: "Experiments are a particularly good way to test the willingness for cooperation in certain situations, as they allow a complete control of the lab environment and, at the same time, confront the participants with real costs and profits. In our experiment, we wanted to recreate the problems of climate policy. Industrialised and developing countries must invest sufficient money in climate protection to avoid damages for all."

In the experiment, participants were divided into groups with six players each. Each group was then asked to raise enough money in several negotiation rounds to finance measures for climate protection in order to limit the temperature raise to two degrees Celsius max. If one group reached the required financing goal at the end of a negotiation round, the participants were rewarded with the surplus money which was not invested in climate protection. If a group did not reach the goal, the savings were likely to be lost in 50 per cent of the cases, i.e. participants of every second group which could not come to an agreement missed out.

To simulate the inequality between industrialised and developing countries, the 240 participants were each given a different amount of money at the beginning of the experiment. The experiment’s findings indicate that the inequality between participants makes achieving the goal more difficult. The goal was reached more often if all players were given the same amount of money at the beginning of the experiment. If, however, there were poor and rich players, the groups were less successful: The rich players often bore little more costs than the poor ones. The poor players on the other hand did not want to pay more to compensate the lacking money. It was clear that rich and poor participants had a different view on how to share the burden equally. If the players were able to communicate with each other, it was easier for them to coordinate investments than without communication. But even if there was the possibility to communicate, only those groups reached the goal that agreed on at fair share of the burden at an early stage. In those groups, the rich players showed their willingness to bear more costs early, and this was then put into action. Groups in which rich players paid more money right from the beginning were more successful than the average in reaching the joint goal.

"In summary, our experiment shows that unequal economic opportunities and unequal responsibility for the problem of global warming are the main obstacles for the willingness to cooperate and consequently for finding a solution for climate change,” says Prof. Dr. Andreas Löschel, head of ZEW research department Environmental and Resource Economics, Environmental Management and professor at Alfred-Weber-Institute at Heidelberg University. “Successful groups were distinguished by the fact that inequality was reduced during the experiment. If the rich players took on responsibility from an early stage onwards, the goal was more likely to be achieved. In our experiment, groups often failed because they could not agree on how to deal with inequality, as can in part also be observed in real climate negotiations."

For further information please contact

Dr. Astrid Dannenberg, E-mmail dannenberg@zew.de

Prof. Dr. Andreas Löschel, Phone +49 621/1235-200, E-mail loeschel@zew.de