Common Tragedies

Thoughts on Environmental Economics

Offsetting Guilt Part 2

Posted by jab12004 on April 2, 2009

While contemplating how to post again on offsets and respond to various comments , the perfect article on the subject was brought to my attention.   Offsetting Green Guilt  by Matthew Kotchen discusses voluntary offsets and their potential effects with academic rigor and properly cited sources.  I really recommend reading it (it’s a manageable 6 pages) if you have ever wondered about the subject.   

One of my favorite parts and motivation for my first post is based in this study cited in Kotchen’s article

Paying to alleviate guilt did lead to worse behavior in one well known study of parents of children in day care.  Uri Gneezy of the University of California, San Diego, and Aldo Rustichini of the University of Minnesota experimented with charging parents a fee when they were late picking up their children. The surprising result was that the number of late pickups increased—more than doubling. The ability to pay a late fee—essentially an offset—alleviated guilt and justified tardiness.

The potential for offsets to be helpful or harmful is also well summed up

But what happens when environmentally minded people purchase carbon off sets? Let’s consider two possibilities. The first is that they do not change their pollution-generating behaviors, which means that their off sets truly reduce their greenhouse gas emissions. The other possibility is that they change their behaviors in ways that generate more emissions—a rebound effect. Because purchasing off sets is easier than continuing to restrain consumption, even conservationists may use off sets to justify more travel, a bigger car, or (as Al Gore has demonstrated) a larger house. If these changes more than offset the offset, they increase a person’s emissions.

Kotchen later points out that some limited empirical results do point to the fact that people do restrain consumption.  However, empirical evidence is somewhat limited at least for now. 

Overall, Kotchen takes a more balanced (and sophisticated) view than my first post and is worth reading.

Personally, I’m curious to see how the offsets business grows as it becomes larger and more popular.  Right now the people who self select into buying voluntary permits are most likely those who would first reduce consumption.  However, much like the Prius emerged as the fashionable car, I could see voluntary offsets being a future green fashion craze.  Can’t you just wait for celebrities walking the red carpet and talking about how they were sure to purchase offsets for their dresses (which they wore once).  I know I’m excited…


One Response to “Offsetting Guilt Part 2”

  1. Carlos Ferreira said

    Granted, voluntary offsets might lead to all the sorts of green washing you’re pointing out (I haven’t read the text but I’ve downloaded it, so I will get to it…).

    A different question is whether or not offsets internalize the externality they’re fighting; mostly, they do. Now, imagine if the price of an offset was added to any airline ticket – making offsetting compulsory. It might sound odd, but that’s what happens to utilities here: they have to offset (OK, they also have a cap, so what I’m talking about sounds a bit more like a tax). Airlines would trample over each other to buy offsets from the most cost-effective producers. And, presumably, price elasticity of demand would kick in and the total emissions would diminish.

    Bottom line? Offsetting is good, but it will diminish consumers’ surplus in the long run. Travelling is tomorrow, the effect of Climate Change is in 15 years, so there’s discounting here. Lots of it. If it’s compulsory, it’s not just green wash and has a real effect on the environmental problem at hand.

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