Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets

Matthew J. Kotchen

NBER Working Paper No. 13643
Issued in November 2007
NBER Program(s):   EEE   PE

This paper examines voluntary provision of a public good that is motivated, in part, to compensate for other activities that diminish the public good. Markets for environmental offsets, such as those that promote carbon neutrality to minimize the impact of climate change, provide an increasingly salient example. An important result, related to one shown previously, is that mean donations to the public good do not converge to zero as the economy grows large. Other results are new and comparable to those from the standard model of a privately provided public good. The Nash equilibrium is solved explicitly to show how individual direct donations and net contributions depend on wealth and heterogenous preferences. Comparative static analysis demonstrates how the level of the public good and social welfare depend on the technology, individual wealth, and an initial level of the public good. Application of the model in an environmental context establishes a starting point for understanding and making predictions about markets such as those for carbon offsets.

download in pdf format
   (231 K)

email paper

This paper is available as PDF (231 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13643

Published: Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, 04. citation courtesy of

Users who downloaded this paper also downloaded these:
Conte and Kotchen w15294 Explaining the Price of Voluntary Carbon Offsets
Epple and Romano w7802 Collective Choice and Voluntary Provision of Public Goods
Burger and Kolstad w15543 Voluntary Public Goods Provision, Coalition Formation, and Uncertainty
Banerjee, Iyer, and Somanathan w12911 Public Action for Public Goods
Levinson w15156 Valuing Public Goods Using Happiness Data: The Case of Air Quality
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us