Push, don't nudge: behavioral spillovers and policy instruments

Policy interventions are generally evaluated for their direct effectiveness. Little is known about their ability to persist over time and spill across contexts. These latter aspects can reinforce or offset the direct impacts depending on the policy instrument choice. Through an online experiment with 1,486 subjects, we compare four widely used policy instruments in terms of their ability to enforce a norm of fairness in the Dictator Game, and to persist over time (i.e., to a subsequent untreated Dictator Game) or spill over to a norm of cooperation (i.e., to a subsequent Prisoner's Dilemma). As specific policy interventions, we employed two instances of nudges: defaults and social information; and two instances of push measures: rebates and a minimum donation rule. Our results show that (i) rebates, the minimum donation rule and social information have a positive direct effect on fairness, although the effect of social information is only marginally significant, and that (ii) the effect of rebates and the minimum donation rule persists in the second game, but only within the same game type. These findings demonstrate that, within our specific design, push measures are more effective than nudges in promoting fairness

Bearing the Cost of Stored Carbon Leakage

Carbon capture and sequestration (CCS) is considered a key technology for stabilizing climate change. However, leakage of CO2 from stored carbon can potentially undermine the value of carbon storage as a mitigation option. Thus, monitoring and verifiability of CO2 storage should be encouraged through policy provisions such as accounting and pricing of leaked emissions. Here we assess different institutional and economic mechanisms for accounting for carbon leakage. Using an integrated assessment model we quantify the impacts on the climate, the economy and the mitigation strategies. Results show that carbon leakage can reduce the share of fossil based CCS by up to 35%, if it is controlled and correctly priced. Biomass based CCS is less affected. Accounting for leakage leads to an increase of climate policy costs of up to 0.4 percentage points due to increased emissions

Solar geoengineering may lead to excessive cooling and high strategic uncertainty

Climate engineering-the deliberate large-scale manipulation of the Earth's climate system-is a set of technologies for reducing climate-change impacts and risks. It is controversial and raises novel governance challenges [T. C. Schelling, Climatic Change, 33, 303-307 (1996); J. Virgoe, Climatic Change, 95, 103-119 (2008)]. We focus on the strategic implications of solar geoengineering. When countries engineer the climate, conflict can arise because different countries might prefer different temperatures. This would result in too much geoengineering: the country with the highest preference for geoengineering cools the planet beyond what is socially optimal at the expense of the others-a theoretical possibility termed "free-driving" [M. L. Weitzman, Scand. J. Econ., 117, 1049-1068 (2015)]. This study is an empirical test of this hypothesis. We carry out an economic laboratory experiment based on a public "good or bad" game. We find compelling evidence of free-driving: global geoengineering exceeds the socially efficient level and leads to welfare losses. We also evaluate the possibility of counteracting the geoengineering efforts of others. Results show that countergeoengineering generates high payoff inequality as well as heavy welfare losses, resulting from both strategic and behavioral factors. Finally, we compare strategic behavior in bilateral and multilateral settings. We find that welfare deteriorates even more under multilateralism when countergeoengineering is a possibility. These results have general implications for governing global good or bad commons

Power systems' performance under high renewables' penetration rates: a natural experiment due to the COVID-19 demand shock

COVID-19 lockdowns make it possible to investigate the extent to which an unprecedented increase in renewables' penetration may have brought unexpected limitations and vulnerabilities of current power systems to the surface. We empirically investigate how power systems in five European countries have dealt with this unexpected shock, drastically changing electricity load, the scheduling of dispatchable generation technologies, electricity day-ahead wholesale prices, and balancing costs. We find that low-cost dispatchable generation from hydro and nuclear sources has fulfilled most of the net-load even during peak hours, replacing more costly fossil-based generation. In Germany, the UK, and Spain coal power plants stood idle, while gas-fired generation has responded in heterogeneous ways across power systems. Falling operational costs of generators producing at the margin and lower demand, both induced by COVID-19 lockdowns, have significantly decreased wholesale prices. Balancing and other ancillary services' markets have provided the flexibility required to respond to the exceptional market conditions faced by the grid. Balancing costs for flexibility services have increased heterogeneously across countries, while ancillary markets' costs, measured only in the case of Italy, have increased substantially. Results provide valuable evidence on current systems' dynamics during high renewables' shares and increased demand volatility. New insights into the market changes countries will be facing in the transition towards a clean, secure, and affordable power system are offered

The benefits of investing into improved carbon flux monitoring

Operationalizing a Global Carbon Observing and Analysis System (www.geocarbon.net) would provide a sound basis for monitoring actual carbon fluxes and thus getting quantities right when pricing carbon – be it in a cap-and-trade scheme or under a tax regime. However, such monitoring systems are expensive and—especially in times of economic weakness—budgets for science and environmental policy are under particular scrutiny. In this study, we attempt to demonstrate the magnitude of benefits of improved information about actual carbon fluxes. Such information enables better-informed policy-making and thus paves the way for a more secure investment environment when decarbonizing the energy sector. The numerical results provide a robust indication of a positive social value of improving carbon monitoring systems when compared to their cost, especially for the more ambitious climate policies

A risk-seeking future

The 2014 IPCC Assessment expresses doubt that the global surface temperature increase will remain within the 2 °C target without deploying risky carbon-capturing or solar radiation-deflecting technologies. New behavioural research suggests that, if the IPCC is right, citizens and policymakers will support such risk-taking