Behavioral sources of the demand for carbon offsets: an experimental study

Kai-Uwe Kuhn () and Neslihan Uler
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Kai-Uwe Kuhn: University of East Anglia

Experimental Economics, 2019, vol. 22, issue 3, No 6, 676-704

Abstract: Abstract Voluntary carbon markets present firms and individuals with the opportunity to offset all or part of their carbon footprints. We report on a controlled laboratory experiment to understand the behavioral motivations driving the purchase of carbon offsets, in addition to investigating the effect of the introduction of voluntary carbon markets on emission-causing activities. We find a stable demand for offsets when the price is sufficiently low. Behavior is, however, heterogeneous. Individuals with a high (low) personal-responsibility index increase their offset purchases as their own damage (total damages) increases, but do not condition their offsetting behavior on the total damages (own damage) generated. We also show that, when individuals trade in competitive markets, the availability of offsets does not affect the total damages generated. Introduction of carbon offsets increases individuals’ earnings by eliminating some of the damages ex-post, but does not increase economic efficiency.

Keywords: Carbon offsets; Public goods provision; Double-auction markets; Heterogeneity; Externalities (search for similar items in EconPapers)
JEL-codes: C92 H41 Q54 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10683-018-09601-y

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