Carbon Footprinting and Pricing Under Climate Concerns

Journal of Marketing, 2022, Vol. 86(2) 186-201

41 Pages Posted: 19 Aug 2021 Last revised: 17 Nov 2022

See all articles by Marco Bertini

Marco Bertini

affiliation not provided to SSRN

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Daniel Halbheer

HEC Paris - Marketing

Donald R. Lehmann

Columbia University - Columbia Business School, Marketing

Date Written: July 24, 2021

Abstract

This article studies how organizations should design a product by choosing the carbon footprint and price in a market with climate concerns. The authors develop a model and first show how the cost and demand effects of reducing the product carbon footprint determine the profit-maximizing product design. They find that stronger climate concerns reduce the product carbon footprint, demand, the overall corporate carbon footprint and profit, but have an ambiguous impact on price. Next, the authors establish that offsetting carbon emissions can create a win-win outcome for the firm and the climate if the cost of compensation is sufficiently low. Going net zero leads to a win for society if the cost of offsetting is sufficiently low compared to the social cost of pollution created by the corporate carbon footprint. Third, the authors show how regulation in the form of a cap-and-trade scheme or a carbon tax affects product design, firm profitability, and green technology adoption. Finally, the authors extend the analysis to a competitive scenario and show that going net zero creates a win-win-win outcome for the firm, the climate, and society if the offset technology is sufficiently effective.

Keywords: Carbon footprint, carbon offsetting, climate impact, net-zero emissions, pricing

Suggested Citation

Bertini, Marco and Buehler, Stefan and Halbheer, Daniel and Lehmann, Donald R., Carbon Footprinting and Pricing Under Climate Concerns (July 24, 2021). Journal of Marketing, 2022, Vol. 86(2) 186-201, Available at SSRN: https://ssrn.com/abstract=3411706 or http://dx.doi.org/10.2139/ssrn.3411706

Marco Bertini

affiliation not provided to SSRN

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

FGN-HSG
Varnbuelstr. 19
CH-9000 St. Gallen
Switzerland
+41-71-224-2303 (Phone)

Daniel Halbheer (Contact Author)

HEC Paris - Marketing ( email )

Paris
France

Donald R. Lehmann

Columbia University - Columbia Business School, Marketing ( email )

New York, NY 10027
United States

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