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

Published online by Cambridge University Press:  14 March 2025

Kai-Uwe Kuhn  and
Neslihan Uler Open the ORCID record for Neslihan Uler [Opens in a new window]
Kai-Uwe Kuhn*
Affiliation:
School of Economics, University of East Anglia, Norwich, UK
Neslihan Uler*
Affiliation:
Agricultural and Resource Economics, University of Maryland, College Park, USA
*
k.kuhn@uea.ac.uk
neslihan@umd.edu
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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 offsetsPublic goods provisionDouble-auction marketsHeterogeneityExternalities

JEL classification

Q54: Climate • Natural Disasters and Their Management • Global Warming H41: Public Goods C92: Laboratory, Group Behavior
Type
Original Paper
Information
Experimental Economics , Volume 22 , Issue 3: Special Issue in Honor of Charles R. Plott , September 2019 , pp. 676 - 704
Copyright
Copyright © 2018 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-018-09601-y) contains supplementary material, which is available to authorized users.

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