Explaining the Price of Voluntary Carbon Offsets

28 Pages Posted: 31 Aug 2009 Last revised: 17 Apr 2022

See all articles by Marc Conte

Marc Conte

University of California, Santa Barbara (UCSB) - Department of Economics

Matthew J. Kotchen

Yale University; National Bureau of Economic Research (NBER)

Date Written: August 2009

Abstract

This paper investigates factors that explain the large variability in the price of voluntary carbon offsets. We estimate hedonic price functions using a variety of provider- and project-level characteristics as explanatory variables. We find that providers located in Europe sell offsets at prices that are approximately 30 percent higher than providers located in either North America or Australasia. Contrary to what one might expect, offset prices are generally higher, by roughly 20 percent, when projects are located in developing or least-developed nations. But this result does not hold for forestry-based projects. We find evidence that forestry-based offsets sell at lower prices, and the result is particularly strong when projects are located in developing or least-developed nations. Offsets that are certified under the Clean Development Mechanism or the Gold Standard, and therefore qualify for emission reductions under the Kyoto Protocol, sell at a premium of more than 30 percent; however, third-party certification from the Voluntary Carbon Standard, one of the largest certifiers, is associated with a price discount. Variables that have no effect on offset prices are the number of projects that a provider manages and a provider's status as for-profit or not-for-profit.

Suggested Citation

Conte, Marc and Kotchen, Matthew J., Explaining the Price of Voluntary Carbon Offsets (August 2009). NBER Working Paper No. w15294, Available at SSRN: https://ssrn.com/abstract=1463887

Marc Conte (Contact Author)

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Matthew J. Kotchen

Yale University ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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