Buying the right to do wrong – An experimental test of moral objections to trading emission permits

Moral objections to quota trade are common in public discussion. The underlying moral reasoning is often hard to extract from the public's rhetoric, and economists often claim that the objections are due to misunderstandings. In this paper we test experimentally one possible objection to trading emission rights: that selling pollution rights is objectionable because it involves trade in the right to do something wrong. The experiment is phrased in a neutral language to avoid invoking subjects’ prior attitudes to trading pollution permits. In the experiment, subjects earn money from using stickers that inflict losses on others. After the initial rounds, the use of stickers is limited and the rights to use stickers are tradable. We observe no reluctance to trade these rights compared to a control treatment with identical incentives but no externalities. In a final stage, subjects vote on whether stickers should be tradable or not. Subjects in both treatments are almost unanimous in the support to trade. A majority of third party subjects asked to judge the experimental procedures, however, indicated that the market made the use of stickers seem more moral. A post experiment survey showed that our subject pool had a negative attitude to real life trade of emission quota. The experiment finds no indication that this attitude is due to a concern over tradable quotas legitimizing morally objectionable actions.