Actually in behavioural psychology speak this isn't negative reinforcement...it is a response cost system.
Negative reinforcement is if you are getting a stimulus (food, pain, whatever) and that stops when you do a behavior....so if you are being pinched by someone and you say "uncle" and the pinching stops that was negative reinforcement.
Response cost is like getting fined, losing a level, etc. And can be a type of punishment.
Punishment is funny because the behavior actually has to reduce or stop the behavior or else it isn't punishment....if the same kid is on red day after day after day....then it isn't very effective. If some kids only randomly get on red then maybe they just made a mistake or needed more information or instruction on how to handle that. And chances are the kids who are always on green would behave without the color system altogether.
I have big problems with the stupid color systems and my son is also an anxious one too.
