Emission Quota Trade among the Few: Laboratory Evidence of Joint Implementation among Committed Countries The Complete Version

The purpose of the laboratory tests reported here is to identify a well-functioning design, tailored for an upcoming unique experiment using real-world relevant decision makers for carbon emission reduction trade among four countries committed to binding carbon emission limits, a form of so-called joint implementation. For reasons given in the paper, the design is required to promote high trade efficiency and a small scope for arbitrage. All designs tested reached high levels of efficiency (87-99%), which is noteworthy given the small number of traders. Attempts to adjust design to reduce or eliminate arbitrage were successful in the final test rounds.