Carbon offsets in the clean development mechanism

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 15 May 2018


Coombs Seminar Room B, Coombs Building 9, Fellows Road, ANU


Dr Leslie Martin, Department of Economics, University of Melbourne.


Ross McLeod, Seminar Convener

This paper evaluates the extent to which carbon offsets in the international emissions trading market represent true emission reductions. In voluntary emissions-reduction programs, regulators allocate credits relative to what they believe firms would have done had they not participated.

We ex-post evaluate the ex-ante counterfactuals. We focus on offsets supplied by manufacturing firms in India, using datasets that include firms that didn’t apply and firms that didn’t participate. After controlling for firm size and industry, we find no evidence of strategic selection into program participation. High-productivity firms are more likely to apply, and firms that are expanding capacity are both more likely to apply and more likely to be chosen to participate. We also document a rebound effect. We find that participants reduce emissions intensity relative to similar non-participant firms, but in a way that is entirely offset by an expansion of output. Of the projects affecting the manufacturing sector, the largest reductions in emissions intensity came from those installing energy efficient technologies. Projects based on fuel switching and blending additives into end-products failed to reduce even the emission intensity of output beyond business-as-usual.

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