Share of carbon offset retirements by publicly listed firms across quartiles of project quality, as measured by MSCI project ratings. Firms are classified based on whether they have an operational presence in the country where the offset project is located.
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Although the climate impact of carbon abatement is geographically invariant, this paper documents limited geographic fungibility in voluntary carbon markets. Firms disproportionately retire offsets in countries where they operate. We contrast an Information Channel, whereby local presence improves project screening, with a Goodwill Channel, whereby supporting local projects enhances reputational visibility. The evidence supports the latter. Offsets retired within firms' operational footprints exhibit systematically lower project quality than those sourced abroad, revealing a negative local quality gradient. This pattern persists with firm experience and generates equilibrium price-quality decoupling: in jurisdictions with concentrated local demand, prices become less responsive to project quality. The resulting distortions can generate a "market for lemons" dynamic, reallocating climate finance away from high-abatement-potential regions toward areas with greater multinational presence. Strategic corporate incentives thus weaken the allocative efficiency of voluntary carbon markets.
Use of carbon offsets (left axis) by suppliers whose customers have approved SBTi targets (red) versus suppliers whose customers do not have approved SBTi targets (black).
This paper examines how suppliers adjust their decarbonization choices when major customers obtain validated emission-reduction targets. Using global supplier-customer links matched to firm-level emissions and project-level data from voluntary carbon registries, the analysis shows that downstream climate pressure elicits both real and symbolic responses, but in systematically different ways across suppliers. On average, treated suppliers become more likely to adopt climate targets of their own. High-emission suppliers subsequently reduce their emission intensity relative to comparable firms, indicating meaningful operational adjustments. Low-emission suppliers, by contrast, do not further reduce emissions; instead, they expand their use of carbon credits, sharply increasing offset intensity as a lower-cost alternative to additional physical abatement. These offsets disproportionately originate from lower-rated projects, suggesting that increased demand does not translate into pressure for higher-quality credits. Overall, downstream climate commitments induce a sorting in decarbonization strategies: high-emission suppliers undertake substantive reductions, while low-emission suppliers rely more heavily on market-based mechanisms to meet customer expectations.
Total lending volume (million Reais) to municipalities with proteced land.
This paper studies how improvements in regulatory information systems affect credit allocation in rural financial markets. In 2021, the Central Bank of Brazil introduced major enhancements to the Rural Credit Bureau, first by integrating geospatial data on borrowers’ plots with national environmental and social compliance registries, and then by automating real-time verification of credit applications. These reforms simultaneously increased the information available to financial institutions and established a centralized second line of defense that blocks non-compliant credit operations. Using municipality-level data, we find that after the improvement in regulatory information, credit growth slowed in areas with larger shares of protected land, particularly among cooperatives and public banks. The effect is consistent across regions and biomes, indicating the operation of a uniform national enforcement mechanism. We rule out confounding policy changes and show that the results are not driven by shifts in credit demand or bank risk exposure. The findings suggest that combining improved data integration with real-time monitoring can strengthen environmental enforcement by redirecting financial flows away from high-risk areas without broadly constraining access to rural credit.
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