Avoiding Catastrophic Climate Change : Heterogeneous Abatement Costs and Voting on Redistribution in a Threshold Public Good Experiment

Achieving the collective goal of limiting global warming is challenging, as it requires national contributions, whereas the benefits are shared between contributors and free-riders. We model this global climate problem as a collective-risk social dilemma (CRSD), a threshold public good game. Our CRSD-experiment studies two key aspects of the global coordination problem related to climate change in a stylised setting: (i) countries are heterogeneous – wealthy countries have high marginal abatement costs (MAC) and low-income countries have MAC – and (ii) wealthy countries decide about climate-related transfers to low-income countries. We find that redistribution increases the likelihood to avoid catastrophic climate change and improves the cost efficiency. Transfers reduce inequality and can still be beneficial for industrial countries due to the higher likelihood to avoid catastrophic climate change. Additional analyses confirm the results. Our findings highlight the importance of climate-related transfers to limit global warming at least cost to society