Conference Agenda

Trade in carbon-emissions reductions is widely agreed to have the potential to greatly lower the cost of climate mitigation. For firms, emissions reductions are sometimes mandated by regulation, leaving only cost minimization as a strategy for increasing profit. Firms might also reduce emissions to attract and retain workers and consumers. Even in this case, lowering costs still increases profits. Thus, demand for carbon offsets is partly driven by the desire to minimize costs. Unfortunately for climate mitigation, lower offset costs may reflect lower quality. Fully non-additional “offsetting” actions cost suppliers nothing, so the “offsets” are cheap; however, this non-additionality implies zero climate mitigation. The demonstrated lack of impact of many carbon offsets due to over-crediting and information asymmetries, when juxtaposed with ongoing corporate purchases of such carbon “offsets,” raises questions regarding firms’ willingness to pay for quality (i.e., impactful) offsets. This study explores how offset characteristics affect firms’ demand. Using a discrete-choice experiment with U.S.-firm managers, we quantify willingness to pay for offsets’ actual effectiveness, social and environmental co-benefits, and implementing partners. We then consider the impact of a threat of greater external monitoring and whether that is a function of self-reported reputational exposure and/or the two principal components we use to distinguish two firm ‘types.’