Matthias Rodemeier wins 2024 IZA Award for Best Paper on Climate Change

Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets

Matthias Rodemeier wins Innovative Research in the Economics of Climate Change Award, Institute of Labor Economics 2024 for his paper “Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets”. The award recognizes important new insights into the broader, often underestimated consequences of climate change and the effects of environmental policies on society and the labor market.


What do markets for voluntary climate protection imply about people's valuations of environmental protection? I study this question in a large-scale field experiment (N=255,000) with a delivery service, where customers are offered carbon offsets that compensate for emissions. To estimate demand for carbon mitigation, I randomize whether the delivery service subsidizes the price of the offset or matches the offset's impact on carbon mitigation. I find that consumers are price-elastic but fully impact-inelastic. This would imply that consumers buy offsets but their willingness to pay (WTP) for the carbon it mitigates is zero. However, I show that consumers can be made sensitive to impact through a simple information treatment that increases the salience of subsidies and matches. Salient information increases average WTP for carbon mitigation from zero to 16 EUR/tCO2. Two complementary surveys reveal that consumers have a limited comprehension of the carbon-mitigating attribute of offsets and, as a result, appear indifferent to impact variations in the absence of information. Finally, I show that the widely-used contingent valuation approach poorly captures revealed preferences: Average hypothetical WTP in a survey is 200 EUR/tCO2, i.e., 1,150% above the revealed preference estimate.