We develop and implement a new method for identifying wasted subsidies and use it to provide systematic evidence of the misallocation of carbon offsets in the Clean Development Mechanism - the world's largest carbon offset program. Using newly constructed data on the locations and characteristics of over 1,000 wind farms in India, we estimate that at least 52 percent of approved carbon offsets were allocated to projects that would very likely have been built anyway. We estimate that the sale of these offsets to regulated polluters resulted in substantially higher global carbon dioxide emissions.

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1 January 2025

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American Economic Journal: Applied Economics 17(1) , pp.1-40, 2025

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DOI: 10.1257/app.20230052

https://www.aeaweb.org/articles?id=10.1257/app.20230052

This Journal article is published under the centre's Growth programme.