Department Environmental Social Sciences
Understanding the demand for carbon-neutral products and services
The main idea of the project is to investigate the private provision of a global public good - carbon-neutral products and services - in the context of combating climate change. The research questions that will be addressed in this project are:
- Which are the main drivers of consumers’ decisions to purchase a carbon-neutral product or service?
- Are people willing to pay more for carbon-neutral products?
- Do customers reward climate-friendly businesses?
- Can revealed preference methods inform about the degree of hypothetical bias in discrete choice experiments?
Emerging voluntary carbon markets, such as carbon offset programs, are becoming increasingly widespread and important, which resulted in a record-high of 42.8 MtCO2e sequestered or avoided in 2018. By purchasing voluntary carbon offsets, one pays for compensating the carbon emissions caused by own consumption or production activities through projects that aim at reducing these emissions. The own activities are hence rendered ‘carbon neutral’. A more recent phenomenon is that companies aim to become carbon neutral. While “green marketing” has existed for a while now, carbon neutrality is taking the concept to the next level.
The economic value of carbon labels, in particular carbon-neutral labels, on products will be examined. In addition, we will explore the role of transparency (displaying the shares of carbon reduction and carbon offsetting on the label) on consumer preferences. Our goal is to provide lessons to policymakers and practitioners on strategies to increase the adoption of green behaviors. In addition to a meta-analysis of the existing literature on the economic valuation of carbon labels, the project relies on two different methods for collecting empirical data: a hedonic analysis based on the actual market data and an online survey including a discrete choice experiment. The hedonic analysis provides a quasi-natural experimental setting as new products enter the market and carbon-neutral products become increasingly popular. This approach complements the meta-analysis and survey, which mainly comprise stated preference methods.
