The Cost of Feeling Green

Voluntary carbon offsetting has become a common feature of consumer markets, from flights to online shopping. Yet a central question remains unanswered: when consumers choose to offset emissions, are they paying for actual climate mitigation, or primarily for the act of offsetting itself? What is the role of firms in shaping consumers’ green preferences? 

What is the role of firms in shaping consumers’ green preferences? When consumers choose to offset emissions, are they paying for actual climate mitigation, or primarily for the act of offsetting itself?

My paper “Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets” addresses these questions using a field experiment conducted with one of Germany’s largest online grocery retailers. Carbon offsets were integrated directly into the checkout page, allowing customers to compensate for the emissions from their delivery by paying a small additional amount. The study observes more than 250,000 customers making real purchase decisions, without knowing they are part of an experiment.

The Consumer Experiment

The experimental design varies two dimensions independently and at random: the price of the carbon offset and the amount of carbon the offset compensates. This makes it possible to identify whether consumer demand for offsets responds to cost, to environmental impact, or to both.

The first main result is stark. Consumers are sensitive to price reductions, but completely insensitive to increases in environmental impact. When the offset compensates more carbon for the same price, including up to four times as much, demand does not increase. This implies that while many consumers are willing to buy an offset, their revealed willingness to pay for the carbon it mitigates is effectively zero. The behavior is consistent with economic theories of “warm glow”, where people donate to feel good about themselves rather than to make a difference in the world. 

What is the role of firms in shaping consumers’ green preferences? When consumers choose to offset emissions, are they paying for actual climate mitigation, or primarily for the act of offsetting itself?

When the Firm also Participates

This pattern changes once the online shop makes corporate participation in the offset program salient. In a separate treatment, customers are explicitly informed that the firm is sharing the cost of the offset, either by subsidizing the price or by matching the quantity of carbon compensated. Under this framing, demand becomes responsive not only to price but also to impact. Consumers are more likely to choose higher-impact offsets, indicating that they now value the amount of carbon mitigation delivered.

Using this variation, the paper estimates an average willingness to pay about €16 per ton of CO₂ when the firm’s contribution is made explicit. The evidence suggests that this response reflects both fairness considerations — as consumers value cost sharing with the firm — and improved cognition, as corporate participation helps make an abstract concept like carbon mitigation more tangible.

Voluntary Action Is Not Enough

However, even this higher revealed willingness to pay remains far below benchmark estimates of the Social Cost of Carbon, which recent studies place around $185 per ton of CO₂. The findings have clear implications: voluntary carbon markets, on their own, are unlikely to internalize more than a small fraction of climate externalities. For policymakers, the results reinforce the view that voluntary initiatives can complement but not substitute for mandatory carbon pricing and regulation.

A complementary survey illustrates why observing true market behavior in the field is so important. When asked about their hypothetical willingness to pay in a survey, customers report an average willingness to pay €238 per ton. This is more than 1,000% higher than what they reveal through actual purchasing behavior in the field. 

The study provides rare field evidence on how consumers value carbon mitigation in real markets, and highlights the importance of corporate social responsibility in encouraging demand for sustainability.