 An Autopsy of the Voluntary Carbon MarketUgo Panizza, Francesco Tripoli and Beatrice Weder di Mauro No 21788, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: The Voluntary Carbon Market (VCM) rests on the premise that one carbon credit compensates for one tonne of emissions. While a growing body of evidence questions the integrity of many credits, much less is known about whether the ability to offset affects firms’ incentives to reduce their own emissions. Using a buyer-linked dataset covering the near-universe of offset retirements, we exploit the 2023 carbon-market scandals as a quasi-natural experiment. Firms that stop offsetting after the shock reduce their operational (Scope 1) emissions substantially more than firms that continue to purchase offsets. This finding is consistent with moral licensing: access to offsets weakens firms’ incentives to undertake internal abatement. We also document persistent oversupply, opaque intermediation, and sharp price and volume responses to the scandals. Our results identify a demand-side problem in the VCM that is distinct from concerns about credit quality: even when credits represent genuine emissions reductions, the option to offset may slow decarbonization within purchasing firms. Keywords: Moral; hazard (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21788 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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