Impartial Policymakers Prefer to Impose Carbon Offset Measures Over Other Climate Policies

Abstract

A sustainable socio-economic development requires the global reduction of CO2 emissions. We utilize an incentivized experiment to map the preferences of ‘policymakers’ over climate actions of ‘decision-makers’. Importantly, our design guarantees that these preferences are unaffected by selfish motives such as a concern about being reelected or an unwillingness to pay for the greater good. Few of our impartial policymakers choose interventions that leave the decision-makers’ autonomy fully untouched. Yet, the choice patterns of those who intervene suggest that policymakers do not simply minimize emissions, but also care about how emissions are reduced. Policymakers strongly prefer pricing policies over directly capping emissions, and among the pricing policies they prefer those that involve voluntary carbon offsetting, even when this leaves considerable scope for decision-makers to selfishly emit CO2. The reason is that policymakers expect decision-makers to voluntarily offset some of their emissions at their own costs, and believe this would eventually improve the outcome with respect to both emissions and the profits of decision-makers compared to a standard carbon pricing policy (without offsetting). Our decision-making data confirm this expectation.

Keywords: CO2 emissions, carbon taxes and offsets, decision-making experiment, choice architecture