It Still Pays to Greenwash: Climate Pledges & Unregulated Markets - Experimental Evidence from the US

Many firms are making net-zero and carbon neutral pledges. In principle, these climate pledges should help consumers and investors identify sustainable options and guide them toward adopting more sustainable behavior. However, due to psychological mechanisms, consumers may reward pledges that sound ambitious but do not correspond to meaningful actions, thereby enabling firms to profit from greenwashing. European and U.S. policymakers have thus far reacted differently to the threat of greenwashing. The former have introduced a ban on all consumer-facing carbon neutral claims that rely on carbon offsets, while the latter have adopted a laissez-faire approach.

We conduct two studies with representative samples of U.S. residents (N=300, N=1500) and an eye-tracking study (N=500) to test whether information provision can help consumers make more informed choices. In our first two studies, we show that while people are not aware of the meaning of the most common climate pledges, they are willing to pay a considerable premium for these claims, thereby confirming that an unregulated market for climate pledges may lead to greenwashing. Moreover, while information provision improves respondents' understanding of the key features of climate pledges, it does not influence their willingness to pay in a consequential setting. Finally, in an eye-tracking study (N=500), we investigate the effect of information provision in a more realistic setting, where respondents receive multiple information about various products. We find that information provision attracts significant attention, but has no effect on understanding and increases recipients' confusion.

About Chiara

Chiara is an LSE Fellow in Economics, with a PhD in Environmental Economics from the London School of Economics (LSE). Her research focuses on how individuals process information and form preferences towards environmental and health policies. Using behavioural economics and experimental methods, she aims to make socially desirable policies more appealing and promote pro-environmental behaviours.

Driven by a passion to study pressing societal issues through an interdisciplinary lens, Chiara believes rigorous academic research should inform real-world policy decisions. To that end, she joined the OECD's Survey on the Willingness to Pay to Avoid Chemicals Exposure (SWACHE) team, working on environmental valuation studies through stated preferences methods to provide policymakers estimates for social cost-benefit analyses. She is also working with the French Agency for Food, Environmental and Occupational Health & Safety (ANSES) to gather evidence to ban octocrylene in cosmetics under the EU REACH regulations. Her goal is to leverage insights into human behaviour to create effective interventions for a more sustainable and equitable world.