The extent of provision of a public good often relies on social awareness and public support for it. This applies, in particular, to global reduction of greenhouse gases and its relevance for mitigating climate change. We examine the concept of “public awareness” by introducing a formal model that analyzes efforts to mitigate climate change in a setting with heterogeneous countries. In the theoretical part we examine the Nash equilibrium of the contribution game. The effects of awareness and economic parameters on mitigation efforts can be disentangled, raising the possibility of linking awareness of climate change with economic wealth. The second part provides some empirical observations and offers the rankings of countries regarding awareness for climate change, as well as an empirical relationship between awareness and economic wealth.

environmental awareness, climate change, public goods, Kyoto Protocol, renewable energies, regional economics, diversity.

In December 2015, the parties to the Kyoto Protocol reached an agreement for reducing anthropogenic greenhouse gas emissions — after years of negotiations. The outcome of the Conference of the Parties (COP 21) in Paris is generally considered positive, albeit insufficient regarding the ambitious goal of limiting global warming to 1.5 degrees. There seems to be some agreement among the scientific community that further actions are needed, in particular after 2030.1

The critical issues, impeding further reaching commitments so far, refer to sharing the cost of this global environmental commodity among highly diverse countries. In this context, Article 3.1 of the United Nations Framework Convention on Climate Change (UNFCCC) requires that the mitigation and adaptation efforts be shared between the parties “on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities”. If, in this context, we look at current efforts of various industrialized countries to mitigate climate change by making use of renewable energy sources (with and without hydroelectricity), we obtain the situation indicated in Fig. 1.

Figure 1.

Share of energy consumption from renewable sources (with and without hydropower) depending on GDP (2013 thousand US-$, pc, ppp) of various industrialized countries.

Source: Authors’ calculations with data from http://data.worldbank.org/ and http://www.bp.com/

There is no clear structure detectable, not with respect to usual concepts of equity (cf. Ekholm et al., 2010), and not that of an “Environmental Kuznets Curve” (EKC) with the share of renewable energy consumption increasing with GDP per capita (cf. Huang et al., 2008 and Stern, 2004). The conclusion is that the decisions to consume energy from renewable sources depend also on other parameters including societal and economic variables, on geographic and climatic conditions, and probably on “awareness” for climate change (cf. UNFCCC, 2014, p. 5), whatever part of diversity this variable comprises. Interestingly, “environmental awareness” has been used in marketing and social psychology as a means to conceptualize environmentally friendly behavior since the late 1960s (cf. Soyez et al., 2009).

Of course, there are other reasons in the various countries to promote renewable energies, the development of new technologies, for example, or to gain more independence from the import of fossil fuels. However, climate change mitigation continues to play a decisive role, as emphasized in, among other sources, the EU-Directive on the promotion of the use of energy from renewable sources (cf. EC, 2017, p. 2).

This paper therefore investigates effects of diversity on efforts to mitigate global warming. In particular, what role does “awareness” of climate change play in combination with economic variables? Should we expect a positive relationship between awareness and economic wealth? What can we learn about “awareness” in our model from empirical data?

As a result of the Lima Climate Change Conference in December 2014, the parties to the Kyoto Protocol were invited “to communicate their intended nationally determined contributions well in advance of the twenty-first session of the Conference of the Parties in a manner that facilitates the clarity, transparency and understanding of the intended nationally determined contributions” (cf. UNFCCC, 2014, p. 2). This implies that the decisions of the parties are to some extent dependent on each other. In the paper, we model this behavior by means of the Nash mechanism, which then reveals effects of diversity on equilibrium decision-making. The role “awareness” plays can then be investigated more clearly. The results obtained in this theoretical framework can be used for some empirical analyses regarding awareness for climate change.

The following section reviews the relevant literature, mainly with respect to climate change and reducing greenhouse gas emissions. Thereafter, we introduce the model with diverse countries. Observable diversity refers mainly to GDP per capita and costs of renewable energy consumption. “Awareness” refers to not directly observable characteristics of a country. The Nash equilibrium, resulting from the interaction of the countries, allows some insight into the effects of diversity. In particular, properties of equilibrium burden sharing in its relation to equity and also in relation to observable characteristics can be analyzed. The then following section is dedicated to some empirical investigations. In particular, awareness will be estimated from observable data, allowing some conclusions concerning the dependence on observable characteristics. Some final remarks conclude the paper.

The literature on the voluntary provision of public goods is abundant, covering nearly all aspects of theoretical and practical relevance (cf., for example, the seminal works by Samuelson, 1954; Olson, 1965, or Bergstrom et al., 1986, among many others). This paper is based on these basic models.

The paper by Bergstrom et al. (1986) is of particular interest because of a neutrality result obtained in the context of a Nash equilibrium determining the equilibrium contributions towards the public good. A redistribution of income among contributing countries, such that no country loses more income than its original contribution, yields a new Nash equilibrium in which each country adjusts the amount of its contribution by precisely the change in its income — and this redistribution has no effect on the equilibrium quantities of the public and private goods. In our context of mitigation efforts with possibly different costs for producing electricity from renewable sources, a financial support of the countries with lower costs would increase total mitigation efforts (cf. Result 3.2).

These basic models on the provision of public goods have been adapted to the environmental context in various ways (cf. the papers mentioned below). Schumacher (2015), for example, introduces “beliefs” to differentiate between environmental optimists and pessimists. One of the results points to the “double deprivation” of the pessimists: they believe that an environmental shock will destroy more of their wealth and they are willing to contribute more towards prevention.

Interest in the concept of “environmental awareness” or “environmental consciousness” originated with the ecological movement in the 1960s. According to Soyez et al. (2009, p. 223), researchers in marketing and social psychology focused first on “personal characteristics, such as sociodemographic variables, of environmentally conscious people.” In the 1970s and 1980s environmentally friendly behavior was more explained in terms of environmentally friendly “attitudes” measurable by means of multi-item scales.

“Personal value orientation” as precursor of sustainable behavior was considered in a further stream of research followed by “cultural values”, which have been investigated for the last ten years or so (cf. again Soyez et al., 2009, p. 224). Of course, cultural values form the basis for cross-cultural studies on environmentally friendly behavior, which are — for obvious reasons — of particular interest for researchers in marketing and social psychology. In this context Soyez (2012) analyzes how environmentally friendly behavior is influenced by cultural values, how national cultural values can be linked to personal pro-environmental behavior. In a different, but nonetheless related context, Shum tests relationships between outcomes of environmental policy and attitudes towards the environment in order “to develop a better understanding of environmental policy divergences and the mechanisms for environmental policy-making” (cf. Shum, 2009, p. 282).

It seems to be plausible to assume that environmental commodities are characterized by a relatively high-income elasticity, at least in industrialized and newly industrialized countries. Consequently, demand for these commodities should rise, and environmental pollution should be reduced with real GDP per capita further increasing. The resulting functional relationship between the level of pollution and GDP per capita points to aspects of an EKC. If such a relationship holds for a multitude of environmental issues, an increasing economic welfare would gradually help to solve local environmental problems. Regarding climate change, global greenhouse gas emissions will nonetheless continue to increase as long as sufficiently many countries raise their emissions. Stern and Common (2000) discuss this case for global SO₂ emissions.

In a local context, Grossman and Krueger “find no evidence that environmental quality deteriorates steadily with economic growth. Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement. The turning points for the different pollutants vary, but in most cases, they come before a country reaches a per capita income of $8000”. Their study uses urban air pollution, the state of the oxygen regime in river basins, fecal contamination of river basins, and contamination of river basins by heavy metals as indicators (Grossman and Krueger, 1995, Abstract; the dollars are 1985 dollars).

Similarly, in a context of water pollution in countries in Central and Eastern Europe with the indicator “biological oxygen demand” (BOD), Archibald et al. (2009, Abstract), find “some evidence for the EKC hypothesis and estimate the per capita income turning point for industrial BOD effluents to be approximately 3800–5000 USD’’. The analysis of Stern and Common (2000) on SO₂ emissions results in an inverted-U shape function of income for a sample of high-income countries.

However, despite these promising examples, according to Stern (2004, p. 1419), the EKC seems to be a hypothesized relationship between various indicators of environmental pollution and GDP per capita. The concept emerged in the early 1990s with studies of the potential environmental impacts of the North Atlantic Free Trade Association (NAFTA). Stern provides an interesting survey on “the rise and the fall of the EKC”, characterizing the EKC as “an essentially empirical phenomenon”, with not much support from econometrics (cf. Stern, 2004, p. 1420). Similarly, Huang et al. (2008, Figure 3), show that there seems to be no empirical evidence supporting the EKC hypothesis for greenhouse gas emissions.

Figure 2.

Share of Expenses on Renewable Energies depending on GDP pc (2013 thousand US-$, ppp) of various industrialized countries.

Source: Authors’ calculations using β (w) with data from http://data.worldbank.org/ and http://www.bp.com/

Figure 3.

Awareness depending on GDP pc (2013 thous. US-$, ppp) of the Annex II countries listed in Table 1 with β (w).

Source: Authors’ calculations with data from http://data.worldbank.org/ and http://www.bp.com/

In the last years, more and more advanced econometric techniques were employed to investigate existence or non-existence of the EKC. Fosten et al. (2012), for example, analyze the EKC with respect to CO₂ and SO₂ emissions in the UK, and provide a useful literature survey on the econometric methods used in this context. As our analysis is based on the formal equilibrium outcomes of the Nash mechanism, the reader interested in econometric methods regarding the EKC is referred to these publications (cf. also Brajer et al., 2011; He and Richard, 2010; Wang, 2013; Yang et al., 2015). A comprehensive survey of the EKC hypothesis up to the year 2004 is provided by Dinda (2004). For further results on the EKC among the vast literature published more recently cf., for example, Kaika and Zervas (2013a, 2013b), and Dong et al. (2016).

Recently, other empirical investigations revealed interesting aspects of the willingness to pay for climate actions. In this context Diederich and Goeschl (2013, Abstract), “uncover determinants of preferences for voluntary climate action, such as education, the information structure among the population, and exogenous environmental conditions.” In a similar way, Borick et al. (2011), and Lorenzoni and Pidgeon (2006) study public views on climate change in the US and Canada, and in Europe and the US, respectively. The “European’s attitude towards climate change” has been a topic of a special survey of “Eurobarometer” (EC, 2008). The focus of this report was on, among other issues, “the extent to which citizens feel informed about climate change.” The results of the poll show that in about two thirds of the EU member states more than sixty percent of those interviewed consider global warming/climate change “to be the most serious problem currently facing the world as a whole” (cf. EC, 2008, p. 8).

Awareness regarding climate change has also been addressed in various publications. Zyadin et al. (2014), for example, investigate the perceptions regarding renewable energies of senior academics and early-stage researchers involved in renewable energy sciences. Similarly, Karytsas and Theodoropoulou (2014) examine the demographic and socioeconomic factors that determine the knowledge of different forms of renewable energy.

Weber and Wiesmeth (1991a, 1991b) investigate the issue of burden sharing in alliances, whereas Ekholm et al. (2010) and Ringius et al. (1998) discuss equitability in the context of climate change mitigation. For more fundamental aspects of equitable allocations cf. Moulin (1987).

So far, the review of the literature leaves us with a somewhat unclear picture. On the one hand we have empirical examples of an EKC, on the other hand we have the investigations of Stern (2004) and the empirical results of Huang et al. (2008), Dong et al. (2016) and our own introductory example in Fig. 1. In order to clarify this situation and uncover the role of “awareness”, the following section introduces the assumptions of the model based on awareness for climate change, and derives the formal results on burden sharing in the context of mitigating climate change. Empirical investigations will thereafter illustrate the practical role of awareness of climate change.

The above considerations show that there is enough room and also a certain necessity for explicitly introducing “awareness’’ into an economic model to mitigate global warming — to capture non-economic aspects of diversity among the countries. The first subsection presents the main assumptions of the model, emphasizing diversity.

With this empirical analysis we want to derive first estimates for the awareness parameter — given the ordinal specification of our utility functions — from the observable data on population, GDP, and renewable energy consumption and the herewith associated cost estimates. In addition, in view of Corollary 3.1 the goal is to understand the empirical relationship between awareness and GDP per capita. As already indicated in the introductory section, we focus on countries, which are parties to the Kyoto Protocol.

4.2. Annex II countries

The United Nations Framework Convention on Climate Change (UNFCCC), resulting from the “Earth Summit” in Rio de Janeiro in 1992, divides countries into three main groups according to differing commitments:6

• Annex I Parties include the industrialized countries that were members of the OECD in 1992, plus countries with economies in transition (the EIT Parties), including the Russian Federation, the Baltic States, and several Central and Eastern European states.
• Annex II Parties consist of the OECD members of Annex I, but not the EIT Parties. They are required to provide financial resources to enable developing countries to undertake emissions reduction activities under the Convention and to help them adapt to adverse effects of climate change.

Table 1 presents the results for the values of GDP per capita (2013 US-$, ppp) and “environmental awareness” for selected Annex II Parties. The countries are ranked according to the values of environmental awareness. The selected countries are somewhat comparable, although not identical, regarding their economic development.

Table 1Download as CSV 

Ranking of Annex II Parties regarding “awareness”.

Country	GDPpc	αi		Country	GDPpc	αi
Norway	66,520	0.407		Switzerland	56,580	0.386
US	53,960	0.380		Sweden	44,760	0.352
Denmark	44,460	0.351		Germany	44,540	0.350
Austria	43,840	0.346		Netherlands	43,210	0.343
Canada	42,610	0.340		Australia	42,540	0.340
Belgium	40,280	0.330		Finland	38,480	0.322
Japan	37,630	0.315		France	37,580	0.314
UK	35,760	0.304		Ireland	35,090	0.300
Italy	34,100	0.293		Spain	31,850	0.277
New Zealand	30,750	0.269		Greece	25,630	0.215
Portugal	25,360	0.213

Note: Values of the α_i for readability multiplied with factor 100. Source: Authors’ calculations with data taken from http://data.worldbank.org/ and http://www.bp.com/

Countries with a supposedly high environmental awareness (Norway, Switzerland, US, Sweden) lead this list of Annex II countries. The only surprise is that the Southern European countries Italy, Spain, Portugal and Greece with a lot of sunshine appear towards the lower end of the ranking.

Observe that in this table we do not include consumption of electricity from hydro power plants, as the availability of hydroelectricity is largely dependent on appropriate geographical conditions. Nevertheless, the abundance of hydroelectricity in some countries might affect consumption of electricity from the other renewable sources. This might in turn have an effect on the empirical value of “awareness”, not taken into account in the above estimations (cf., however, Fig. 3).

The theoretical part of this paper analyzes the interaction of the agents of various countries regarding efforts to mitigate climate change. These efforts are measured by renewable energy consumption and the interaction is governed by the Nash mechanism. The results demonstrate the influence of “awareness”, in addition to the economic variable “GDP per capita” on burden sharing.

The empirical part of the paper makes use of the first-order conditions to allow an explicit computation of the awareness parameters for various countries. The results are dependent on the levelized costs of energy from renewable sources, for which there are only more or less rough estimates. The estimates of LCOE applied here lead to aspects of an empirical EKC for awareness of climate change.

Future research in this context could focus on this more or less latent variable “awareness”. Which parameters influence awareness, and how could awareness be raised in order to accelerate efforts to mitigating climate change. However, it is also necessary to improve the empirical analysis through a more careful estimate of the levelized costs of energy from renewable sources. So far, the estimates available in the literature are rather imprecise and incomplete.

Part of the paper was written while Hans Wiesmeth was visiting SMU in Dallas and NES in Moscow, and Shlomo Weber was visiting TU Dresden. Financial support from the Department of Economics at SMU and LISOMO at NES, and the Faculty of Economics at TU Dresden are gratefully acknowledged.

Shlomo Weber is grateful to the “Domodedovo” group of companies for financial support of the NES Center for the Study of Diversity and Social Interactions in 2018–2019. This paper is the continuation of the research conducted under auspices of the grant No. 14.U04.31.0002 of the Ministry of Education and Science of the Russian Federation administered through NES CSDSI in 2013–2017. The research work of Hans Wiesmeth was gratefully supported by Act 211 Government of the Russian Federation, contract No. 02.A03.21.0006.

The authors are grateful to an anonymous referee, who pointed to various issues regarding the empirical analysis and future research.

Proof of Proposition 3.1: For the proof we note that the system of first order conditions is symmetric in the sense that symmetrically exchanging indices leads from one equation to the other ones. Therefore, this property is retained for the solutions. Next, we show that the first one of these first order conditions is fulfilled by plugging in the above values of t_i. This equation reads:

(k₁ + α₁) t_i + k₂t₂ + … + k_n t_n = α₁w^{^}₁ (A1)

From straightforward calculations we immediately obtain the following expression for the total quantity of the public commodity T = k₁t₁ + … + k_n t_n provided in equilibrium:

(A2)

Thus, it remains to show: T + α₁t₁ = α₁w^{^}₁. Canceling out α₁ and rearranging the terms by means of the above formula we obtain:

( (T /α₁) + t₁) (k₁α^–₁ + … + k_n α^–_n + α^–) = k₁α^–₁w^{^}₁ + … + k_n α^–₁w^{^}_n +

+ k₂α^–₂w^{^}₁ – k₂α^–₁w^{^}₂ + k₃α^–₃w^{^}₁ + … + k_n α^–_nw^{^}₁ – k_n α^–₁w^{^}_n + α^–w^{^}₁ =

= k₁α^–₁w^{^}₁ + … + k_n α^–₁w^{^}_n + α^–w^{^}₁ = w^{^}₁(k₁α^–₁ + … + k_n α^–_n + α^–) (A3)

and the desired result follows. By making use of symmetry considerations, the other equations are also fulfilled with these values of the t_i, i ∈ N.

Proof of Result 3.2: For a total monetary transfer Δ from country i to country j each individual has to contribute the amount Δ/k_i and each individual of country j obtains the amount Δ/k_j. Consider then

(A4)

from the proof of Proposition 3.1 above. We can similarly calculate T^Δ and investigate the difference to T by focussing on the relevant terms:

(A5)

But this last expression is positive for β_i > β_j.

Proof of Theorem 3.1: In order to simplify the notation, we compare t₁w^{^}₂ with t₂w^{^}₁. A straightforward calculation using real GDP and the nominators of the above terms yields:

t ₁w^{^}₂ ≤ t₂w^{^}₁ ⇔

k ₂α^–₂w^{^}₁w^{^}₂ – k₂α^–₁w^{^}₂² + … + k_n α^–_nw^{^}₁w^{^}₂ – k_n α^–₁w^{^}₂w^{^}_n + α^–w^{^}₁w^{^}₂ ≤

k ₁α^–₁w^{^}₁w^{^}₂ – k₁α^–₂w^{^}₁² + … + k_n α^–_nw^{^}₁w^{^}₂ – k_n α^–₂w^{^}₁w^{^}_n + α^–w^{^}₁w^{^}₂ (A6)

Simplifying and substituting W^{^}_i for k_i w^{^}_i, i ∈ N, yields:

t ₁w^{^}₂ ≤ t₂w^{^}₁ ⇔ (W^{^}₁ + … + W^{^}_n) α^–₂w^{^}₁ ≤ (W^{^}₁ + … + W^{^}_n) α^–₁w^{^}₂

⇔ α^–₁w^{^}₁ ≤ α^–₂w^{^}₂ (A7)

thus, arriving at the desired result.