Computing the social costs of carbon through Coase bargaining in the context of an offsetting program in the Venetian lagoon

The paper adds to the narrow literature on saltmarsh carbon storage. It aims at proposing and testing an original climate policy measure that encompasses other policies limitations, under specific conditions. In particular, the study aims at adopting nonmarket valuation methods (e.g., contingent valuation) for assessing the willingness to pay (WTP) of local CO2 polluters to carbon offsetting by refurbishing local stock of natural capital that absorbs CO2. We apply the framework to the Venice Lagoon ecosystem and the Murano artistic glass sector. Murano artistic glass producers are confronted with the choice to internalize CO2 emissions externalities through the reconstruction and conservation of Venetian barene, local saltmarshes that are very productive in carbon sequestration and stocking. Results show that local polluters present a very high WTP to contribute for the natural capital that stocks and absorb the CO2. However, only a small portion of polluters is willing to pay for the public good, even if the stated value exceeds literature and policy estimates of the social costs of carbon. Results suggest that WTP for a global public good could account for a significant part of the social costs of carbon (and could even exceed it) even though it represents only a few people’s WTP. The key is the context in which the payment is made. The experiment and results can support very local policies for carbon offsetting and climate change mitigation based on local Coasian bargaining.