Private provision of public goods in a second-best world: Cap-and-trade schemes limit green consumerism

Grischa Perino

No 13-01, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: Private provision of public goods can only supplement government provision if individual actions affect the level of the public good. Cap-and-trade schemes reduce the overuse of common resources such as a stable climate or fish stocks by imposing a binding cap on total use by regulated agents. Any private contributions provided by means of e.g. green consumerism or life-style choices within such a scheme only impacts on who uses the resource but leaves total use unaffected. Perfect offsetting of marginal contributions is a key design element of cap-and-trade schemes. As real world cap-and-trade policies like the EU Emission Trading System have incomplete coverage, understanding what they cover is crucial for individuals aiming to contribute. Otherwise contribution efforts backfire.

Keywords: cap-and-trade; green consumerism; emissions tax; crowding-out of private contributions; carbon labelling (search for similar items in EconPapers)
JEL-codes: D64 H23 H31 H41 Q54 Q58 (search for similar items in EconPapers)
Date: 2013-01-24
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
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Citations: View citations in EconPapers (2)

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