Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action

In this study, we assess the challenges and prospects of investigating whether and how the use of carbon credits affects corporate internal emission reductions. To this end, we review the existing literature related to the use of carbon credits and corporate emission reductions, conduct qualitative interviews, and investigate the possibility of developing a study design for assessing whether the use of carbon credits has a causal effect on internal emission reductions

We find that based on the existing literature, no clear conclusion can be drawn as to whether the use of carbon credits has a causal effect on internal emission reductions or not, and if so, if that effect would be positive or negative. The interviews suggest that carbon credits are used for various purposes and that companies’ approaches towards using carbon credits have changed over time. In addition, we find that when exploring the relationship between the use of carbon credits and internal emission reductions, several factors need to be considered, including potential endogeneity, data limitations and structural changes in companies’ approaches towards using carbon credits. Therefore, it is very challenging to develop a robust and representative study design to empirically test whether the use of carbon credits has a causal effect on internal emission reductions.