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Offsetting versus Mitigation Activities to Reduce CO2 Emissions: A Theoretical and Empirical Analysis for the U.S. and Germany

Author

Listed:
  • Andreas Lange

    (University of Hamburg)

  • Andreas Ziegler

    (University of Kassel)

Abstract
This paper studies the voluntary provision of public goods that is partially driven by a desire to offset for individual polluting activities. We first extend existing theory and show that offsets allow a reduction in effective environmental pollution levels while not necessarily extending the consumption of a polluting good. We further show a nonmonotonic income-pollution relationship and derive comparative static results for the impact of an increasing environmental preference on purchases of offsets and mitigation activities. Several theoretical results are then econometrically tested using a novel data set on activities to reduce CO2 emissions for the case of vehicle purchases in the U.S. and Germany. We show that an increased environmental preference triggers the use of CO2 offsetting and mitigation channels in both countries. However, we find strong country differences for the purchase of CO2 offsets. While such activities are already triggered by a high general awareness of the climate change problem in the U.S., driver’s license holders in Germany need to additionally perceive road traffic as being responsible for CO2 emissions to a large extent.

Suggested Citation

  • Andreas Lange & Andreas Ziegler, 2012. "Offsetting versus Mitigation Activities to Reduce CO2 Emissions: A Theoretical and Empirical Analysis for the U.S. and Germany," MAGKS Papers on Economics 201218, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201218
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ziegler, Andreas & Schwirplies, Claudia, 2014. "The determinants of voluntary carbon offsetting: A micro-econometric analysis of individuals from Germany and the United States," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100422, Verein für Socialpolitik / German Economic Association.
    2. Blasch, Julia & Ohndorf, Markus, 2015. "Altruism, moral norms and social approval: Joint determinants of individual offset behavior," Ecological Economics, Elsevier, vol. 116(C), pages 251-260.
    3. Blasch, Julia & Farsi, Mehdi, 2012. "Retail demand for voluntary carbon offsets – a choice experiment among Swiss consumers," MPRA Paper 41259, University Library of Munich, Germany.
    4. Andreas Lange & Claudia Schwirplies & Andreas Ziegler, 2014. "On the interrelation between carbon offsetting and other voluntary climate protection activities: Theory and empirical evidence," MAGKS Papers on Economics 201447, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Claudia Schwirplies & Andreas Ziegler, 2015. "Offset carbon emissions or pay a price premium for avoiding them? A cross-country analysis of motives for climate protection activities," MAGKS Papers on Economics 201504, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Kesternich, Martin & Löschel, Andreas & Römer, Daniel, 2016. "The long-term impact of matching and rebate subsidies when public goods are impure: Field experimental evidence from the carbon offsetting market," Journal of Public Economics, Elsevier, vol. 137(C), pages 70-78.
    7. Julia Blasch & Mehdi Farsi, 2014. "Context effects and heterogeneity in voluntary carbon offsetting - a choice experiment in Switzerland," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(1), pages 1-24, March.

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    More about this item

    Keywords

    public good; voluntary provision; climate change; CO2 offsetting; vehicle purchase; discrete choice models;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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