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Do Carbon Offsets Offset Carbon?

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  • Raphael Calel
  • Jonathan Colmer
  • Antoine Dechezleprêtre
  • Matthieu Glachant

Abstract

We develop and implement a new method for identifying wasted subsidies, and use it to provide systematic evidence on the misallocation of carbon offsets in the Clean Development Mechanism—the world’s largest carbon offset program. Using newly constructed data on the locations and characteristics of 1,350 wind farms in India—a context where it was believed, ex ante, that the Clean Development Mechanism could significantly increase development above baseline projections—we estimate that at least 52% of approved carbon offsets were allocated to projects that would very likely have been built anyway. In addition to wasting scarce resources, we estimate that the sale of these offsets to regulated polluters has substantially increased global carbon dioxide emissions.

Suggested Citation

  • Raphael Calel & Jonathan Colmer & Antoine Dechezleprêtre & Matthieu Glachant, 2021. "Do Carbon Offsets Offset Carbon?," CESifo Working Paper Series 9368, CESifo.
    • Handle: RePEc:ces:ceswps:_9368
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    Cited by:

    1. Filewod, Ben & McCarney, Geoff, 2023. "Avoiding leakage from nature-based offsets by design," LSE Research Online Documents on Economics 117928, London School of Economics and Political Science, LSE Library.
    2. Estelle Cantillon & Aurélie Slechten, 2023. "Market Design for the Environment," NBER Chapters, in: New Directions in Market Design, National Bureau of Economic Research, Inc.
    3. Thales A. P. West & Sven Wunder & Erin O. Sills & Jan Borner & Sami W. Rifai & Alexandra N. Neidermeier & Andreas Kontoleon, 2023. "Action needed to make carbon offsets from tropical forest conservation work for climate change mitigation," Papers 2301.03354, arXiv.org.
    4. Aliénor Cameron & Marc Baudry, 2023. "The case for carbon leakage and border adjustments: where do economists stand?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 435-469, July.
    5. Filewod, Ben & McCarney, Geoff, 2023. "Avoiding leakage from nature-based offsets by design," LSE Research Online Documents on Economics 117927, London School of Economics and Political Science, LSE Library.
    6. Rodemeier, Matthias, 2023. "Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets," IZA Discussion Papers 15939, Institute of Labor Economics (IZA).
    7. Aliénor Cameron & Marc Baudry, 2022. "The case for a Carbon Border Adjustment: Where do economists stand?," Policy Papers 2022.01, FAERE - French Association of Environmental and Resource Economists.
    8. Jaraitė, Jūratė & Kurtyka, Oliwia & Ollivier, Hélène, 2022. "Take a ride on the (not so) green side: How do CDM projects affect Indian manufacturing firms’ environmental performance?," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).

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    More about this item

    Keywords

    carbon offsets; infra-marginal support; subsidies; investment; wind power; misallocation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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