Group Rewards and Individual Sanctions in Environmental Policy

40 Pages Posted: 1 May 2007

See all articles by Bouwe Dijkstra

Bouwe Dijkstra

University of Nottingham - School of Economics

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg

Date Written: April 2007

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. In environmental policy, the EU burden sharing agreement and the UK Climate Change Agreements feature this incentive scheme. There is only a difference in outcome between group and individual rewards if emissions are stochastic. Group rewards generally lead to higher expected emissions than individual rewards. The attraction of the group reward scheme may lie in its fairness and its tough-looking targets.

Keywords: Team Incentive Scheme, Stochastic Pollution, UK Climate Change Agreements

JEL Classification: Q54, Q58

Suggested Citation

Dijkstra, Bouwe and Rübbelke, Dirk T. G., Group Rewards and Individual Sanctions in Environmental Policy (April 2007). FEEM Working Paper No. 44.2007. Available at SSRN: https://ssrn.com/abstract=983033 or http://dx.doi.org/10.2139/ssrn.983033

Bouwe Dijkstra (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 8467205 (Phone)
+44 115 9514159 (Fax)

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg ( email )

Freiberg, 09599
Germany

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