Working Paper: NBER ID: w31495
Authors: Daniel Aronoff; Will Rafey
Abstract: We introduce an empirical framework for valuing markets in environmental offsets. Using newly-collected data on wetland conservation and offsets, we apply this framework to evaluate a set of decentralized markets in Florida, where land developers purchase offsets from a small number of long-lived producers that restore wetlands over time. We find that offsets led to substantial private gains from trade, creating about $2.2 billion of net surplus from 1995–2018 relative to a historical conservation mandate. Offset trading also led to large differences in hydrological outcomes, driven by significant differences between restored and existing wetlands in terms of area and location. A locally differentiated Pigouvian tax on offset transactions would have prevented $1.3 billion of new flood damage while preserving more than two-thirds of the private gains from trade.
Keywords: No keywords provided
JEL Codes: L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trading of wetland offsets (Q27) | substantial private gains from trade (F10) |
| offset trading (F16) | significant changes in hydrological outcomes (Q25) |
| offset trading (F16) | increase total flood damages (Q54) |
| locally differentiated Pigouvian tax on offset transactions (H23) | eliminate nearly 90% of flood damages (Q54) |
| locally differentiated Pigouvian tax on offset transactions (H23) | preserve more than two-thirds of private gains from trade (F10) |