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Group rewards and individual sanctions in environmental policy

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  • Dijkstra, Bouwe R.
  • Rübbelke, Dirk T.G.

Abstract

We 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. This incentive scheme is applied in the UK Climate Change Agreements. There is only a difference in outcome between group and individual rewards if performance is stochastic. Group rewards lead to lower abatement than individual rewards if targets are realistic, i.e. if they have a high probability of being reached. Given the strictness of the targets, the agents prefer group rewards. The principal might want to use group rewards because they require less information, out of fairness concerns, or to combine strict targets with weak enforcement.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 35 (2013)
Issue (Month): 1 ()
Pages: 38-59

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Handle: RePEc:eee:resene:v:35:y:2013:i:1:p:38-59

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Web page: http://www.elsevier.com/locate/inca/505569

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Keywords: Team incentive scheme; Stochastic emissions; UK Climate Change Agreements;

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References

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Cited by:
  1. Barbot, Cristina & Betancor, Ofelia & Socorro, M. Pilar & Viecens, M. Fernanda, 2014. "Trade-offs between environmental regulation and market competition: Airlines, emission trading systems and entry deterrence," Transport Policy, Elsevier, vol. 33(C), pages 65-72.
  2. Bouwe R. Dijkstra & Dirk T.G. Rübbelke, 2007. "Group Rewards and Individual Sanctions in Environmental Policy," Working Papers 2007.44, Fondazione Eni Enrico Mattei.

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