Working Paper: NBER ID: w16305
Authors: James B. Bushnell
Abstract: Although international programs for carbon offsets play an important role in current and prospective climate-change policy, they continue to be very controversial. Asymmetric information creates several incentive problems, include adverse selection and moral hazard, in offset markets. The current regulatory focus on additionality tends to paint all these problems with a broad brush without proper consideration of the context or their implications.
Keywords: carbon offsets; climate change policy; asymmetric information; adverse selection; moral hazard
JEL Codes: H23; L14; L5; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| asymmetric information (D82) | adverse selection (D82) |
| adverse selection (D82) | payments for non-additional reductions (H23) |
| lower emissions firms (Q52) | sell offsets (Y60) |
| moral hazard (G52) | manipulation of emissions baselines (Q52) |
| manipulation of emissions baselines (Q52) | inflated perceived reductions (E31) |
| regulatory framework (G38) | distortion of perceived benefits of offsets (D61) |
| delayed investments (G31) | maintain eligibility for offset payments (H55) |