Making or Buying Environmental Public Goods: Do Consumers Care?

Abstract

Firms may voluntarily abate pollution using one of two options: internalizing their own external effects and incurring abatement costs (“making”), or delegating environmental protection by purchasing offsets (“buying”). We aim to elicit consumers’ willingness to pay for producers’ use of the “making” option as compared to the “buying” option, controlling for spatial effects (joint local public goods), and level of greenhouse gas emissions. Using a stated-choice survey of 722 respondents, we find consumers are more willing to pay for a “making” policy. Consumers do significantly care for the producers’ use of offsets when the level of local externalities is controlled for. (JEL Q54, Q58)