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Primary Discipline

Social Sciences


While much work has examined the large-scale compliance-based carbon offset programs associated with the Kyoto Protocol and Clean Development Mechanism, there has been far less focus on the voluntary purchasing of carbon offsets. This critical literature review will look at the formation and management of the demand for voluntary carbon offsets within the United States. It will frame carbon offsets as impure public goods and review possible explanations as to why private provision has been so active in the U.S. market. The paper will then survey the efficiency gains and other benefits associated with the voluntary market. It will highlight the informational asymmetries that undermine these benefits through moral hazard and adverse selection. To mitigate these concerns, it will examine the current regulatory environment for voluntary offsets and propose possible pathways to optimize the market through regulation in the future.