The market for voluntary carbon offsets

Florian Berg, Marco Ceccarelli, Florian Heeb, Alexey Ivashchenko, Roberto Rigobón and Remco C. J. Zwinkels

No 462, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We study pricing in the voluntary carbon market (VCM) using a novel proprietary dataset of sales of emission reduction certificates (credits) by a leading VCM dealer. We document extraordinary price dispersion, with carbon credits trading between a few cents and $100 per ton of CO2. Prices are systematically related to the credit project, buyer, and trade characteristics, rather than to a common value of carbon emissions. Credits from the least reliable emission reduction technologies, but with positive noncarbon externalities, are twice as expensive as trusted industrial solutions. Buyers in low-emission industries, wealthier countries, and large firms pay a premium for carbon credits, while heavy polluters and firms with explicit sustainability commitments do not. VCM pricing also features volume and client relationship discounts typical for over-the-counter markets. Finally, we document a causal link between the introduction of the VCM futures market and price premia for credits eligible for expiring futures settlement.

JEL-codes: G12 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:333925

DOI: 10.2139/ssrn.5822702

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