Raphael Calel of Georgetown University, USA, and colleagues provide systematic evidence on carbon offset misallocation by examining wind farms constructed in India through to 2013. They conclude it is highly likely that at least 52% of the wind farms supported by the Clean Development Mechanism (CDM) would have been built anyway, which means the programme approved more than 28 million tonnes of CO2 emissions. If the same rate of misallocation applies to all CDM projects across the world, it could lead to 6.1 billion more tonnes of CO2. Furthermore, the authors find the allocation of offsets compares unfavourably with a lottery-based approach, showing that there is room for improvement in the design and verification process.
Original reference: Am. Econ. J. 17, 1–40 (2025)
