“Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets” by Matthias Rodemeier, accepted at Review of Financial Studies

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

Matthias Rodemeier

Accepted at Review of Financial Studies

Abstract

This paper estimates willingness to pay (WTP) for carbon mitigation from the demand for carbon offsets in a field experiment with an online supermarket (N=255,000). To estimate demand for carbon mitigation, I randomize whether the firm 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 implies that consumers buy offsets but their WTP for the carbon it mitigates is zero. If the firm informs consumers that it contributes to the offset costs, WTP increases to 16 EUR/tCO2. This finding highlights that firms can play an important role in encouraging consumers to lower their carbon footprint. Finally, consumers’ stated WTP in a complementary survey is 238 EUR/tCO2, more than 1,000% above the revealed preference estimate.