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The market for voluntary carbon offsets

Author

Listed:
  • Berg, Florian
  • Ceccarelli, Marco
  • Heeb, Florian
  • Ivashchenko, Alexey
  • Rigobón, Roberto
  • Zwinkels, Remco C. J.

Abstract

We study pricing in the voluntary carbon market (VCM) using a novel proprietary dataset of sales of emission reduction certificates (credits) by a leading VCM dealer. We document extraordinary price dispersion, with carbon credits trading between a few cents and $100 per ton of CO2. Prices are systematically related to the credit project, buyer, and trade characteristics, rather than to a common value of carbon emissions. Credits from the least reliable emission reduction technologies, but with positive noncarbon externalities, are twice as expensive as trusted industrial solutions. Buyers in low-emission industries, wealthier countries, and large firms pay a premium for carbon credits, while heavy polluters and firms with explicit sustainability commitments do not. VCM pricing also features volume and client relationship discounts typical for over-the-counter markets. Finally, we document a causal link between the introduction of the VCM futures market and price premia for credits eligible for expiring futures settlement.

Suggested Citation

  • Berg, Florian & Ceccarelli, Marco & Heeb, Florian & Ivashchenko, Alexey & Rigobón, Roberto & Zwinkels, Remco C. J., 2025. "The market for voluntary carbon offsets," SAFE Working Paper Series 462, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:333925
    DOI: 10.2139/ssrn.5822702
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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