Contracting for Impure Public Goods: Carbon Offsets and Additionality
NBER Working Paper No. 16963
Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important to the use of carbon offsets to mitigate climate change. We analyze optimal contracts for forest carbon, an important offset category. A novel national-scale simulation of the contracts is conducted that uses econometric results derived from micro data. For a 50 million acre increase in forest area, annual government expenditures with optimal contracts are found to be about $4 billion lower compared to costs with a uniform subsidy.
Document Object Identifier (DOI): 10.3386/w16963
Published: Mason, C.F., and A.J. Plantinga. 201 3 . The Additionality Problem with Offsets: Optimal Contracts for Carbon Sequestration in Forests. Journal of Envi ronmental Economics and Management 66:1 - 14.
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