Lecture by Matthias Rodemeier, University Luigi Bocconi, Italy
Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets
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 with a delivery service, where customers are offered carbon offsets that compensate emissions. To estimate demand for carbon mitigation, the delivery service randomly subsidizes the price of the offset or raises the quantity of carbon that the offset compensates. I cross-randomize an information treatment that explicitly informs customers when the price has been subsidized, or the quantity has been raised. Without such information, consumers are price-elastic but fully quantity-inelastic. This would imply that consumers demand the offset but not because of its impact: willingness to pay (WTP) for carbon mitigation would be zero. With information, however, consumers become quantity-elastic, and WTP increases to 16 EUR/tCO2. Using two complementary surveys, I find that part of the information effect is a change in beliefs about the effectiveness of the offset. Finally, I show that the widely-used contingent-valuation approach heavily diverges from the revealed preference estimate: Average hypothetical WTP in a survey is 200 EUR/tCO2, i.e., 1,150% above the revealed preference estimate with information.