Behavioral Sources of the Demand for Carbon Offsets: An Experimental Study

Kai-Uwe Kühn and Neslihan Uler
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Kai-Uwe Kühn: Centre for Competition Policy and School of Economics, University of East Anglia

No 2017-01, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: Voluntary carbon offset schemes have sprung up in the last decade offering individuals opportunities to neutralize their own carbon footprint. These schemes strongly appeal to the personal responsibility of individuals in reducing the carbon emissions they cause. In this paper we report on a controlled laboratory experiment to better understand the behavioral motivations driving the purchase of carbon offsets, i.e., payments towards the reduction of damages to the environment. We show that the opportunity to offset damages does not affect the total damages created by the individuals when individuals trade in competitive markets. At the same time, we find a stable demand for carbon offsets when the price is sufficiently low. Therefore, introduction of carbon offsets increases efficiency by eliminating some of the damages ex-post. Behavior, however, is very 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 damages) created.

Date: 2017-03-01
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Related works:
Journal Article: Behavioral sources of the demand for carbon offsets: an experimental study (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2017_01

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