Template-type: ReDIF-Paper 1.0

Author-Name: Ugo Panizza
Author-Email: ugo.panizza@graduateinstitute.ch
Author-Workplace-Name: Geneva Graduate Institute and CEPR
Author-Workplace-Homepage: https://www.graduateinstitute.ch/international-economics-presentation

Author-Name: Francesco Tripoli
Author-Email: ftripoli@hbs.edu
Author-Workplace-Name: Harvard Business School
Author-Workplace-Homepage:

Author-Name: Beatrice Weder di Mauro
Author-Email: beatrice.wederdimauro@graduateinstitute.ch
Author-Workplace-Name: Geneva Graduate Institute and CEPR
Author-Workplace-Homepage: https://www.graduateinstitute.ch/international-economics-presentation

Title: An Autopsy of the Voluntary Carbon Market
Abstract: The Voluntary Carbon Market (VCM) rests on the premise that one carbon credit compensates for one tonne of emissions. While a growing body of evidence questions the integrity of many credits, much less is known about whether the ability to offset affects firms' incentives to reduce their own emissions. Using a buyer-linked dataset covering the near-universe of offset retirements, we exploit the 2023 carbon-market scandals as a quasi-natural experiment. Firms that stop offsetting after the shock reduce their operational (Scope 1) emissions substantially more than firms that continue to purchase offsets. This finding is consistent with moral licensing: access to offsets weakens firms' incentives to undertake internal abatement. We also document persistent oversupply, opaque intermediation, and sharp price and volume responses to the scandals. Our results identify a demand-side problem in the VCM that is distinct from concerns about credit quality: even when credits represent genuine emissions reductions, the option to offset may slow decarbonization within purchasing firms.
Keywords: Voluntary Carbon Market; Carbon credits; Integrity controversy; Rebound effects; Moral hazard; GHG Emissions
Classification-JEL: G14, L11, L51, Q54

Length: 53 pages
Creation-Date: 2026-08-03
Revision-Date:
Publication-Status: 

Number: 21-2026
File-URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP21-2026.pdf
File-Format: application/pdf
File-Size: 
Handle: RePEc:gii:giihei:HEIDWP21-2026