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

Author

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  • Kai-Uwe Kuhn

    (University of East Anglia)

  • Neslihan Uler

    (University of Maryland)

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.

Suggested Citation

  • Kai-Uwe Kuhn & Neslihan Uler, 2019. "Behavioral sources of the demand for carbon offsets: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 22(3), pages 676-704, September.
    • Handle: RePEc:kap:expeco:v:22:y:2019:i:3:d:10.1007_s10683-018-09601-y
    DOI: 10.1007/s10683-018-09601-y
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    Cited by:

    1. Stehr, Frauke & Werner, Peter, 2021. "Making Up for Harming Others — An Experiment on Voluntary Compensation Behavior," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242396, Verein für Socialpolitik / German Economic Association.
    2. Lata Gangadharan & Charles N. Noussair & Marie-Claire Villeval, 2019. "Introduction to the special issue in honor of Professor Charles R. Plott," Experimental Economics, Springer;Economic Science Association, vol. 22(3), pages 577-584, September.
    3. Christoph Kerner & Thomas Brudermann, 2021. "I Believe I Can Fly—Conceptual Foundations for Behavioral Rebound Effects Related to Voluntary Carbon Offsetting of Air Travel," Sustainability, MDPI, vol. 13(9), pages 1-11, April.

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    More about this item

    Keywords

    Carbon offsets; Public goods provision; Double-auction markets; Heterogeneity; Externalities;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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