Offsetting Versus Mitigation Activities to Reduce $$\hbox {CO}_{2}$$ CO 2 Emissions: A Theoretical and Empirical Analysis for the U.S. and Germany

This paper studies the voluntary provision of public goods that is partially driven by a desire to offset for individual polluting activities. We first extend existing theory and show that offsets allow a reduction in effective environmental pollution levels while not necessarily extending the consumption of a polluting good. We further discuss the impact of an increased environmental preference on purchases of offsets and mitigation activities. Several theoretical results are then econometrically tested using a novel dataset on activities to reduce $$\hbox {CO}_{2}$$ CO 2 emissions for the case of vehicle purchases in the U.S. and Germany. We show that environmental preference triggers the stated use of $$\hbox {CO}_{2}$$ CO 2 offsetting and mitigation channels in both countries. However, we find strong country differences for the stated purchase of $$\hbox {CO}_{2}$$ CO 2 offsets. While such activities are mainly triggered by a high general awareness of the climate change problem in the U.S., the perception that road travel is responsible for $$\hbox {CO}_{2}$$ CO 2 emissions to a large extent is more important for driver’s license holders in Germany.