German consumers' willingness to pay for carbon emission reductions: An empirical analysis of context dependence and provider participation

Voluntary carbon offsetting is being promoted as a promising way to help mitigating carbon emissions and limiting the dangerous impacts of anthropogenic climate change. This paper aims at identifying potential drivers and barriers of such offsetting activities by providing empirical insights into individuals' preferences and willingness to pay for certain offsetting options. For our empirical analyses, we use representative data from four choice experiments on travelling among more than 1000 participants from Germany. Our empirical findings indicate that afforestation projects in the participants' region are preferred to compensations realized in a European country outside Germany or in developing countries and to compensations associated with energy efficiency and renewable energies. In line with revealed preferences in the existing literature, participants also have a significant preference and willingness to pay for provider participation according to the 1:1 matching scheme. We also show that the willingness to pay estimates differ significantly with the compensation context, i.e. means of transportation (bus vs. plane) and travel occasion (private vs. business). Our results reveal a massively higher willingness to pay and also a higher willingness to move away from the no-choice option to compensate emissions caused by bus journeys which might be due to the low overall compensation costs. This finding highlights an immense potential of voluntary carbon offsetting for consumption activities which produce a low amount of emissions.