Social and Behavioral Sciences Commons^™

Carbon Offset Provision With Guilt-Ridden Consumers, Joshua S. Gans, Vivienne Groves

Joshua S Gans

Carbon offsets can be purchased by consumers who wish to mitigate their emissions. In a model where the demand for such offsets is driven by consumers who feel guilt about their emissions, it is show that the introduction of offsets are complements to existing „dirty‟ consumption and can cause such consumption to increase. Net emissions are shown to decline, however, regardless of whether prices are regulated, chosen strategically or offset prices are endogenous. One special case is illustrated whereby emissions might rise if „dirty‟ producers can engage in strategic commitments to impact on offset markets.