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Environmental Offset Programs: Survey and Synthesis


Robert W. Hahn


University of Oxford, Smith School; Georgetown University

Kenneth R. Richards


Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); University of Oxford - Oxford Martin School


Indiana University School of Public & Environmental Affairs Research Paper No. 2010-12-01

Abstract:     
In the real world, taxes and cap-and-trade systems are rarely implemented in their pure form. In this paper, we examine a related approach that has been used widely in practice – which we refer to as an “offset.” The idea behind offsets is to encourage firms or entities that may not be a part of the main regulatory system to produce environmental improvements, which can then be used to offset pollution reduction requirements in the main regulatory system.

This paper provides a survey and synthesis of the literature on the use of offsets. Examples include offsets for limiting greenhouse gas emissions, maintaining ecosystem services for wetlands, achieving local air pollution goals, protecting water quality, and promoting energy efficiency. The paper reviews how offsets are used in practice and examines what is known about their environmental and economic impacts.

Combining insights from the political economy of using offsets with their intrinsic design challenges raises a potentially serious problem – namely, that offsets may often fail to take adequate account of environmental or ecosystem damages. Because this problem can be significant, alternatives should be considered.

Number of Pages in PDF File: 36

Keywords: Tax, Cap-and-trade, Offests, Regulatory systems, Environment, Pollution, Greenhouse gas emissions, Ecosystem, Wetlands, Water quality, Energy efficiency

JEL Classification: G18, M2, Q28, K23, L5, L51, O2, O38, Q1, Q30

working papers series


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Date posted: December 12, 2010 ; Last revised: June 25, 2014

Suggested Citation

Hahn, Robert W. and Richards, Kenneth R., Environmental Offset Programs: Survey and Synthesis. Indiana University School of Public & Environmental Affairs Research Paper No. 2010-12-01. Available at SSRN: http://ssrn.com/abstract=1721544 or http://dx.doi.org/10.2139/ssrn.1721544

Contact Information

Robert W. Hahn (Contact Author)
University of Oxford, Smith School ( email )
Oxford
United Kingdom
Georgetown University
Georgetown Center for Business and Public Policy
Washington, DC 20057
United States
Kenneth R. Richards
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )
1315 East Tenth Street
Bloomington, IN 47405
United States

University of Oxford - Oxford Martin School
United Kingdom
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