Innovation in clean energy as a commitment device

The starting point of this project is how the present generation can make future generations reduce their GHG emissions. The basic idea is that by developing and installing environmentally friendly capital and technologies, for example, cheap solar power or insolation of buildings, costs of obtaining low GHG emissions will be reduced for future generations, thereby fulfilling the aim of the present generation to lower future GHG emissions.

In 2014 and 2015, a recursive Integrated Assessment Model has been built, that can be used to simulate scenarios and study innovations as commitment device for climate policy. The research topic has also been addressed through a novel dynamic coordination game. The game captures features of a transition between externality networks. Coordination is required to implement the transition while minimizing costs. We have set up an experiment, in which the game is repeated five times, which enables groups to learn to coordinate over time. We compare a neutral language treatment with a ‘green framing’ treatment, in which meaningful context is added to the instructions. We find the green framing to significantly increase the number of profitable transitions, but also to inhibit the learning from past experiences, and thus it reduces coherence of strategies. Consequently, payoffs in both treatments are similar even though the green framing results in twice as many transitions.