Where Firms Retire Carbon Offsets: Operational Footprints and Offset Quality

Although the climate benefit of carbon abatement does not depend on where it occurs, firms do not treat carbon offsets as geographically fungible. Using transaction-level data on corporate retirements in voluntary carbon markets, we show that foreign firms retire disproportionately more offsets in countries where they operate, but these local retirements are systematically lower quality than the same firms' retirements elsewhere. We distinguish two mechanisms. Operational presence may improve screening of local projects, or it may raise the private value of visible local sourcing. The evidence supports the second mechanism. The quality gap declines with firm experience, consistent with learning, but is strongest in settings where local visibility is likely to matter most, including countries with higher climate ambition and weaker governance. Subsidiary-entry events corroborate the within-firm pattern: when a firm establishes a new subsidiary in a country, retirements there rise sharply, but these offsets come from lower-quality projects than the firm's retirements in other countries. Finally, in project segments where demand is dominated by firms with local operations, prices are less closely aligned with project integrity. The results reveal a demand-side distortion in markets for global public goods, whereby location-specific reputational benefits shift demand toward lower-quality supply and weaken the informational content of prices.