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The Economics of Carbon Accounting and Carbon Offsets


  • Geoffrey Heal


I provide a rigorous framework for accounting for corporate greenhouse gas emissions, based on the Greenhouse Gas Protocol. I show that only Scope 1 emissions are of interest from a national policy perspective: that emissions in Scopes 2 and 3 are duplicative, and that downstream Scope 3 emissions in total are equal to total Scope 1 emissions. The correct measure of a company's contributions to national GHG emissions is its Scope 1 emissions plus a part of the emissions of the household and government sectors. This is not generally the same as the level of emissions for which a company bears some responsibility, legal or otherwise. I apply some of these ideas to an analysis of carbon offsets, trying to understand the conditions under which offsets are a valid mechanism for reducing emissions by formalizing the ideas of additionality and leakage.

Suggested Citation

  • Geoffrey Heal, 2022. "The Economics of Carbon Accounting and Carbon Offsets," NBER Working Papers 30649, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:30649
    Note: EEE

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    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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