We study the voluntary provision of public goods that is partially driven by a desire to offset for individual activities that do harm to the public. We first extend existing theory to address the interaction between polluting activities and purchases of environmental offsets, such as those that promise CO2 neutrality. Importantly, we show that offsets allow a reduction in effective pollution levels while generally extending polluting consumption. We show a non-monotonic income-pollution relationship and derive comparative static results for the impact of an increasing environmental preference on purchases of offsets and mitigation efforts. The hypotheses are then tested using a novel data set on car users in Germany and the U.S. We show that an increased preference for the environment affects the sequence of reducing the polluting activity versus increased purchases of CO2 offsets differently in the two countries: on average, Germans with high preferences for the environment to first reduce the polluting activity and then purchase offsets, while the sequence is opposite for respondents from the U.S.

The full paper (work in progress) can be found below.