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Explaining The Price Of Voluntary Carbon Offsets

Author

Listed:
  • MARC N. CONTE

    (Stanford University, Stanford, CA 94305, USA)

  • MATTHEW J. KOTCHEN

    (Yale University and NBER, New Haven, CT 06511, USA)

Abstract

This paper identifies factors that explain the large variability in the price of voluntary carbon offsets. We estimate hedonic price functions using a variety of provider- and project-level characteristics as explanatory variables. We find that providers located in Europe sell offsets at prices that are approximately 30% higher than providers located in either North America or Australasia. Contrary to what one might expect, offset prices are generally higher, by roughly 20%, when projects are located in developing or least-developed nations. But this result does not hold for forestry-based projects. We find evidence that forestry-based offsets sell at lower prices, and the result is particularly strong when projects are located in developing or least-developed nations. Offsets that are certified under the Clean Development Mechanism or the Gold Standard, and therefore qualify for emission reductions under the Kyoto Protocol, sell at a premium of more than 30%; however, third-party certification from the Voluntary Carbon Standard, one of the popular certifiers, is associated with a price discount. Variables that have no effect on offset prices are the number of projects that a provider manages and a provider's status as for-profit or not-for-profit.

Suggested Citation

  • Marc N. Conte & Matthew J. Kotchen, 2010. "Explaining The Price Of Voluntary Carbon Offsets," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 93-111.
    • Handle: RePEc:wsi:ccexxx:v:01:y:2010:i:02:n:s2010007810000091
    DOI: 10.1142/S2010007810000091
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    References listed on IDEAS

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    1. Aldy,Joseph E. & Stavins,Robert N. (ed.), 2007. "Architectures for Agreement," Cambridge Books, Cambridge University Press, number 9780521871631, June.
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    4. Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, April.
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    More about this item

    Keywords

    Voluntary carbon offsets; hedonic price method;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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