An Experimental Analysis of Intensity-Based Emissions Trading Schemes

Last registered on May 27, 2025
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Pre-Trial

Trial Information

General Information

Title
An Experimental Analysis of Intensity-Based Emissions Trading Schemes
RCT ID
AEARCTR-0016017
Initial registration date
May 22, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
May 27, 2025, 7:14 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Australia
Region

Primary Investigator

Name
Peiyao Shen
Affiliation
University of Queensland
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Lana Friesen
PI Affiliation
University of Queensland
Contact Investigator
PI Name
Ian MacKenzie
PI Affiliation
University of Queensland
Contact Investigator

Additional Trial Information

Status
In development
Start date
2025-05-22
End date
2025-12-31
Keywords
Behavior, Environment & Energy, Lab
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Emissions trading schemes (ETS) are widely implemented to regulate greenhouse gas emissions, including the long-running European Union ETS and the U.S. Regional Greenhouse Gas Initiative. These almost exclusively employ a standard cap-and-trade scheme where the quantity of available pollution permits (i.e., allowable pollution) is fixed and predetermined. In contrast, an alternative approach, such as an intensity-based ETS, only fixes the required emissions intensity or rate (i.e., emissions per unit of output produced) rather than total emissions, is gaining popularity. Such an approach has been adopted in China's national ETS and Australia’s Safeguard Mechanism reforms. In this study, we aim to investigate the theoretical foundation and behavioural implications of the intensity-based ETS compared to the traditional cap-and-trade scheme. Through lab experiments, we will theoretically and experimentally compare the relative performance of intensity-based emissions trading schemes with the standard cap-and-trade scheme.
External Link(s)

Registration Citation

Citation
Friesen, Lana, Ian MacKenzie and Peiyao Shen. 2025. "An Experimental Analysis of Intensity-Based Emissions Trading Schemes." AEA RCT Registry. May 27. https://doi.org/10.1257/rct.16017-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
Intervention Start Date
2025-05-22
Intervention End Date
2025-10-31

Primary Outcomes

Primary Outcomes (end points)
Total output; Total emissions; Permit price; Cost-effectiveness.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
distribution of emissions or abatement among polluters, and polluter profits
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
This study employs a laboratory experiment conducted in a standard university experimental economics lab, with participants recruited from a broader student population. Participants will be part of a single group of twelve participants for the duration of the experiment.

The main experimental task involves subjects making decisions about how many units of a fictitious good to produce. Each unit of product generates an amount of pollution, which must be either covered by holding a pollution permit or by abating the emission at a cost. Participants will receive an initial endowment of free permits and can trade them through a double auction market. Participants' earnings will be proportional to the profits they make from production and trading permits. Participants will have different types varying in their production and abatement costs.

We will consider two treatments: i) a standard cap-and-trade design with a fixed quantity of permits available, and ii) an equivalent intensity-based scheme, where emission allowances are tied to output decisions. Cost parameters and permit endowments will be chosen to maintain the maximum parallelism between the two treatments.
In addition, the experiment elicits participants' risk preferences and standard demographic information, which will be used as control variables in regression specifications to account for individual heterogeneity in behaviour.
Experimental Design Details
Randomization Method
Participants will be recruited via email through the SONA system. They choose between a list of available sessions, and the session is randomized to a treatment before it is initialized.
Randomization Unit
Individual
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
12 groups of 12 subjects per group
Sample size: planned number of observations
144 individuals
Sample size (or number of clusters) by treatment arms
72 individuals in the cap-and-trade treatment
72 individuals in the intensity-based treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
University of Queensland BEL LNR
IRB Approval Date
2025-05-16
IRB Approval Number
2025/HE000824
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials