How much are Individuals willing to pay to Offset their Carbon Footprint? The Role of Information Disclosure and Social Norms

Abstract
In this research we investigate individuals' willingness to pay (WTP) to offset their greenhouse gas (GHG) emissions. In particular, we are interested in how individual WTP responds to (i) information disclosure, i.e. receiving information about the size of their carbon footprint, and (ii) social norms, i.e. receiving information about the difference between their carbon footprint and the per-capita GHG emissions compatible with climate neutrality (here: 1 ton of CO2equ).

Individuals in T2 were additionally informed by how much their carbon footprint in 2019 exceeded the footprint compatible with climate neutrality. We then asked participants from all three groups, how many euros at most they would be willing to pay privately to offset their GHG emissions in 2019 as calculated by the carbon footprint calculator. To mitigate hypothetical bias, we employed a strong cheap talk design.

To analyze the data, we estimated a double-hurdle model which explicitly models the decision of whether to pay for the carbon footprint at all (first hurdle, extensive margin) separately from the decision of how much to pay (second hurdle, intensive margin). The results suggest that providing information about the carbon footprint (T1) increases the average WTP pay by about 20 euro (i.e. about 40%), and the conditional WTP (i.e. intensive margin) by about 26 euro (i.e. about 30%). In comparison, disclosing information about the carbon footprint does not appear to affect the extensive margin. For our social norm treatment (T2), we find no statistically significant effects on the extensive and intensive margin. Across all groups, individuals are on average willing to pay about 11 euro per ton of CO2equ.

In addition, we find that younger participants, women, individuals believing that offsetting is an effective means to protect the climate, and participants who are well aware and informed about climate change are more likely to state a positive WTP. Conditional on paying a positive amount, participants who are younger, male, richer, better educated, believe that offsetting is an effective means to protect the climate, are well aware and informed about climate change, and who have stronger environmental preferences are associated with a higher stated WTP. Surprisingly, we find no evidence that the size of the carbon footprint is related with the extensive or intensive margin.

Joint paper with Sven Alsheimer.

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