The relationship between willingness to pay and carbon footprint knowledge: Are individuals willing to pay more to offset their carbon footprint if they learn about its size and distance to the 1.5 °C target?

Abstract

We examine individuals' willingness to pay to offset their carbon footprint (WTPO) in response to receiving information about (i) their own carbon footprint size (size nudge), and (ii) receiving information about their own carbon footprint size and the gap with per-capita GHG emissions consistent with the 1.5 °C target (distance-to-target nudge). We employ a demographically representative online survey among the adult population in Germany which includes a carbon footprint calculator and the randomized information nudges. Results from estimating double-hurdle regression models suggest that the size nudge increases participants' average WTPO by about one third. Yet, we find only limited support that the distance-to-target nudge affects participants' WTPO. We further find that participants' response to the information nudge is primarily effective for younger participants, females, participants with mid-range income, with high levels of education, and with low to medium-sized carbon footprints, ceteris paribus. Further, the WTPO is positively related with income, education, carbon literacy, and environmental preferences. Also, participants tend to underestimate the size of their carbon footprint relative to that of others. We find no evidence, however, that participants' WTPO depends on whether they believe that their carbon footprint is lower or higher than that of others.