Tag Archives: Market Mechanism

Money, Motivation, and Nature

Emissions trading faces opposition from many sides. One specific argument against emissions trading is based on the fact that humans are to some extent intrinsically motivated to care for the environment. This intrinsic motivation can disappear, however, if people are also paid for caring for the environment. Emissions trading can thus “crowd out” the intrinsic motivation to care for the environment. Therefore, it may ultimately lower environmental protection.

The effect of motivation crowding has been shown in spectacular experiments. For example, in one experiment people were asked whether they would be willing to host a radioactive waste site in their village (the idea being that this counts as some sort of altruistic act; it is driven by a sense of civic duty since some village in the country has to host the waste site). Other people were asked the same question but in addition they were told that the national government would compensate the village that hosted the site. Interestingly, people were less willing to host the waste site in their village if they knew that they would be compensated!

Without compensation people agreed to host the waste site because they probably thought something like: “One village or other has to host it, nothing speaks against us — so the right thing is to agree to it.” With the compensation people opposed the waste site because they probably thought something like: “Well, it’s a deal. We host the site and in return we get compensated. So, is that a good deal for us? No, it isn’t.”

The same with emissions trading. Without emissions trading, people might lower their emissions due to a sense of duty to play their part in the common effort. With emissions trading, they might get the impression that releasing emissions is in principle fine so long as one does not exceed one’s “cap” on emissions or so long as one buys emission rights off from others. One can get paid for emission reductions below the cap — so why do it voluntarily?

So — should we oppose emissions trading because it crowds out intrinsic motivation to reduce emissions voluntarily? I think not. My (semi-tentative) objection is this. I agree that emissions trading crowds out intrinsic motivation. I agree that this crowding out is bad. However, I think it’s unrealistic to avoid the motivation crowding effect anyway. Why?

  1. Firstly, I assume that there will be some “putting a price on carbon” anyway. It is completely unrealistic that future environmental policies will rely purely on voluntary (or command-andc-control) measures for the protection of the environment.
  2. Secondly, I assume that the motivation crowding effect depends much more on whether there is a “price on carbon” at all rather than on how extensively a “price on carbon” is used as a strategy for reducing carbon.

In other words: Given that people are already accostumed to the idea that there is a price on carbon (and carbon reductions), I doubt that much additional intrinsic motivation will be crowded out if emissions trading is used. Motivation crowding may thus not be a strong objection to using emissions trading more widely.