Emission quota trade among the few: laboratory evidence of joint implementation among committed countries

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