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Carbon markets play a critical role in firms’ and governments’ climate strategies by enabling the purchase and sale of carbon credits. These credits represent a specific amount of carbon emissions (CO₂) that has been mitigated through projects, such as avoiding deforestation or destroying potent greenhouse gases. These credits help organizations and countries meet their climate targets by offsetting a portion of their own emissions.

The Problem

A pressing question is whether these carbon credits really reflect genuine emission reductions or whether the claimed effects are illusory. Do these projects truly benefit the environment or are we paying for something that lacks tangible value? Carbon crediting mechanisms allow project developers to earn credits through emission reduction projects. However, numerous studies have raised concerns about environmental integrity. A systematic assessment has been lacking to date.

The New Study and its Findings

The new meta-study published in Nature Communications analyzes 14 studies covering 2,346 climate projects and 51 studies of comparable projects for which no carbon credits were issued. All studies considered were based on experimental or rigorous observational methods. The analysis covers one fifth of the total credit volume issued to date, which corresponds to almost a billion tonnes of CO₂ emissions.

The analysis shows that less than 16% of carbon credits issued to the evaluated projects represented actual emission reductions. Specific examples of this are:
 

• For clean cookstove projects, in which traditional stoves are replaced by cleaner ones, the actual emission reductions corresponded to only 11% of the carbon credits issued.
• In the abatement of the potent greenhouse gas SF₆, the actual emission reductions amounted to only 16% of the carbon credits issued.
• Avoided deforestation showed a 25% reduction.
• Reducing the potent greenhouse gas HFC-23 performed comparatively well, with actual emission reductions amounting to 68%.

With regard to wind energy, the data shows that the projects would probably have been implemented even without the sale of carbon credits and that issuing carbon credits did not lead to any additional mitigation. Improved forest management was also implemented in reference areas without access to carbon credits to the same extent as in areas that benefited from carbon credits.

In projects destroying the waste gases hydrofluorocarbon (HFC)-23 and sulphur hexafluoride (SF₆) in industry, however, the data shows that waste gas generation increased when plant operators were able to generate carbon credits.

Urgent Need for Improved Certification Rules

Dr. Benedict Probst, Head of the Net Zero Lab at the Max Planck Institute for Innovation and Competition, emphasized, “There is an urgent need to establish better rules for issuing carbon credits. All project types face systemic quality issues, and the quantification of emission reductions needs substantial improvement.”

Co-author Dr. Lambert Schneider from the Oeko-Institut in Berlin points out that there is too much leeway when calculating emission reductions. “The rules of the carbon crediting programs often give project developers too much flexibility. This can lead to unrealistic assumptions being made or inaccurate data being used, resulting in an overestimation of reductions.”

The carbon crediting programs have a particular responsibility to improve the quality of the carbon credits, the authors indicate. Carbon crediting programs should enhance their approaches to assessing projects and calculating emission reductions to ensure they are based on conservative assumptions and the latest scientific findings.

The Societal Importance of the Study

Major climate goals are at risk: if carbon credits do not lead to real emission reductions, we will not make the progress we think we are making in combating climate change.

A potential trust issue looms: governments and firms rely on carbon credits to meet their climate pledges. If these credits are ineffective, it could undermine trust in carbon markets, which are seen as an essential tool in the fight against global warming.

Avoiding potential greenwashing is critical: some firms could use ineffective carbon credits to claim “carbon neutrality” without actually reducing their emissions, misleading consumers and regulators.

Conclusion

The study shows that carbon markets are not delivering the necessary and expected impact. Reforms are urgently needed to ensure that carbon credit mechanisms are truly contributing to mitigate climate change. If we do not reform these mechanisms, we risk missing climate targets and allowing firms to appear more environmentally friendly than they really are.

About the Net Zero Lab

Environmental economist Benedict Probst has led an independent Max Planck Research Group at the Max Planck Institute for Innovation and Competition in Munich since May 2024. The Net Zero Lab aims to accelerate the development of green technologies that are crucial for replacing fossil fuels in industry as well as of technologies that directly remove CO₂ from the atmosphere.

For more information on the Net Zero Lab, see: https://www.netzerolab.science/

Directly to the study:

Probst, Benedict S., et al. (2024). Systematic assessment of the achieved emission reductions of carbon crediting projects, Nature Communications, 15, 9562. Available at https://doi.org/10.1038/s41467-024-53645-z

All data in filterable graphics: https://www.carboncredits.fyi/

Other scientists and institutions contributing to the study:

Malte Toetzke (1,4), Andreas Kontoleon (3), Laura Díaz Anadón (3,5), Jan C. Minx (6,7), Barbara K. Haya (8), Philipp A. Trotter (10,11), Thales A.P. West (3,12), Annelise Gill-Wiehl (13), Volker H. Hoffmann (2)

(1) Net Zero Lab, Max Planck Institute for Innovation and Competition, (2) Group for Sustainability and Technology, ETH Zurich, (3) Department of Land Economy, Centre for Environment, Energy, and Natural Resource Governance, University of Cambridge, (4) Public Policy for the Green Transition, Technical University of Munich, (5) Harvard Kennedy School, Harvard University, (6) Mercator Research Institute on Global Commons and Climate Change, (7) Priestley International Centre for Climate, School of Earth and Environment, (8) Goldman School of Public Policy, University of California, Berkeley, (9) Oeko-Institut, Berlin, (10) Schumpeter School of Business and Economics, University of Wuppertal, (11) Smith School of Enterprise and the Environment, University of Oxford, (12) Institute for Environmental Studies (IVM), Vrije Universiteit Amsterdam, (13) Energy & Resources Group, University of California, Berkeley.

The OA movement seeks to eliminate cost barriers for accessing scientific knowledge. This is supported by major international policies like the Berlin Declaration (2003) and mandates such as the U.S. White House Directive (2022). By 2025, federally funded U.S. research must be freely available without delay, underscoring OA’s expanding global influence.

Impact on Researchers and Institutions

For researchers, publishing in reputable, high-impact journals is essential for career advancement. Historically, the costs of accessing research were managed by university libraries, resulting in steep subscription price increases, known as the “serials crisis”. OA, through models like “Gold OA” (funded by article processing charges – APCs) and transformative agreements (TAs), has sought to address these challenges by shifting costs to publishing rather than reading.

Yet, debates persist. Critics worry that APC-based systems might compromise research quality by incentivizing volume over rigor. Additionally, while OA enhances visibility and downloads, its impact on citation metrics remains modest. Meanwhile, transformative agreements between publishers and institutions aim to cap costs but show varying success in fostering competition and transparency.

Comprehensive Analysis of Open Access Impacts

The authors examine how OA policies, particularly TAs, are reshaping the relationships between researchers, publishers, and institutions. They highlight that while OA increases the visibility of research, it also introduces challenges, such as the potential impact of  APC-based models on research quality.

Evaluation of Transformative Agreements (TAs)

A major focus is on TAs, which aim to replace subscription costs with OA publishing fees. The authors analyze these agreements for their effectiveness and incentive structures, pointing out that many TAs (with notable exceptions like those at the University of California) lack sufficient mechanisms to control costs effectively.

Emphasis on Market Structures and Competition

The article highlights the opportunities and risks OA poses for competition among publishers. While APC-based OA theoretically enhances competition for paper submission among publishers by shifting the decision-making from readers under the traditional reader-pays model (multi-homing) to authors under the author-pays model (single-homing), the authors warn that OA “Big Deals” (where one or more universities and a single publisher negotiate the APCs for publishing in any of the latter’s journals) may further concentrate the market and stifle innovation.

Linking Publishing and Data Analytics

The authors explore how major publishers like Elsevier are increasingly integrating data analytics tools into their business models, potentially enhancing their market dominance. This trend is critically evaluated for its implications on competition and the independence of scientific data analytics.

Policy Recommendations and Evidence-Based Experiments

Mueller-Langer and McCabe advocate for experimental approaches to accompany policy measures like the U.S. Office of Science and Technology Policy (OSTP) initiative. These could help better understand the effects of new funding and publishing models, allowing for more informed and effective policymaking.

Conclusion

The authors provide valuable insights into how OA strategies could reshape the balance between publication costs, access to research, and quality assurance. Their article emphasizes the need for careful monitoring and evaluation of market mechanisms to ensure a sustainable and competitive scholarly communication landscape in the long term.

Directly to the study:

McCabe, Mark J.; Mueller-Langer, Frank (2024). Open Access Is Shaping Scientific Communication – Funders and Publishers Should Roll Out Policies in Ways to Support Their Evaluation, Science, 385 (6714), 1170-1172. Available at https://doi.org/10.1126/science.adp8882

The new study examines whether pharmaceutical firms move away from filing strategic patents once the focal drug gains marketing authorization and the disclosed trial-related information becomes novelty-threatening prior art.

The authors construct novel patent-drug dyadic data and leverage unique European drug patent and marketing contexts. Using an event study methodology, they exploit plausibly exogenous variation in the length of time from patent filing to drug approval. First, they illustrate that drugs with early and late marketing authorization share similar ex ante patent and drug characteristics. Second, they support the hypothesis that strategic patenting behavior decreases substantially after marketing authorization. In contrast, meaningful follow-on innovations remain unaffected. Third, they show that these effects are likely driven by obstacles in the enforceability of marginal patents filed after approval.

The results of the study suggest that post-marketing increases in patentability standards are welfare-enhancing with examiner scrutiny and firm self-adjustment. They highlight the importance of better data provision to patent examiners to increase the quality of follow-up inventions.

Lucy Xiaolu Wang was a Senior Research Fellow at the Institute and is now a tenure-track Assistant Professor at the University of Massachusetts Amherst. She continues to be closely associated with the Institute as an Affiliated Research Fellow.

Dennis Byrski was a Junior Research Fellow at the Institute. In 2021 he submitted his doctoral thesis titled “From Scientific Research to Healthcare Markets – Empirical Essays on the Economics of Pharmaceutical Innovation”. He is now a Junior Engagement Manager at McKinsey & Company.

The American Society of Health Economists is a professional organization dedicated to promoting excellence in health economics research. It aims to enhance individual and societal health by providing evidence and expertise for the development of private and public policies. ASHEcon’s awards honor individuals who have made significant contributions to the field of health economics.

Directly to the publication:
Byrski, Dennis; Wang, Lucy Xiaolu (2024). Marktzulassung und strategische Patentierung: Evidence from Pharmaceuticals. Verfügbar unter https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4638115.

More information:
2024 ASHEcon Award Winners

With its findings, the international project Data Governance in Emerging Economies to Achieve the Sustainable Development Goals contributes to the discussion on how Data Governance can be used to achieve the Sustainable Development Goals of the United Nations, especially in emerging economies. Together with researchers from India, the data governance landscape in the Indian healthcare sector is being examined. The report, which has now been published, presents preliminary findings along with questions for defining a research agenda building on the insights from the multistakeholder-workshops organized in Bengaluru in September 2022.

Written in the specific context of SDG 3, the report underscores the role of data governance for good health and well-being in India. A brief introduction to the project is followed by four more sections. It first provides a detailed background on the selection of SDG 3 and India for the study of data governance in growth regions. The second section offers an overview of the existing legal framework for data governance in India. In addition to analyzing open data initiatives, this section maps the judicial and legislative steps towards safeguarding personal data, while highlighting the ongoing efforts to legislate non-personal data sharing. In addition to analyzing open data initiatives, this section outlines the legal and legislative steps taken to protect personal data and highlights the ongoing efforts to legislate the sharing of non-personal data. The findings from the workshop are used in the next section to examine the role of the public sector, private sector and start-ups in determining the scope of data governance in the Indian healthcare sector. The final section summarizes the findings and emphasizes the importance of a data governance framework for achieving the Sustainable Development Goals, particularly SDG 3 in India. Finally, the researchers pose a series of questions aimed at developing a research agenda to help build a framework for data governance in emerging economies like India.

A result of doctrinal research and participatory discussion with the stakeholders, the report indicates the need for stronger engagement with all the stakeholders for evolving appropriate data governance frameworks – including but not limited to – measures establishing legal rights and obligations of stakeholders. The institutional and technical aspects of data governance are considered an essential complement. More broadly, project deliberations point towards significant gains resulting from a data governance approach, developed in close relation with the SDG framework, to legal research and policy formulation.

Arul George Scaria, Vikas Kathuria, Shraddha Kulhari, Vidya Subramanian
Data Governance in Emerging Economies to Achieve the Sustainable Development Goals
India Country Report Based on the Workshop Data Governance for Good Health & Well-Being: India’s Way Forward to Achieving Sustainable Development Goal 3 (Bengaluru, September 8-9, 2022)
Max Planck Institute for Innovation & Competition Research Paper No. 24-08

Mor Bakhoum, Begoña Gonzalez Otero, Jörg Hoffmann, Minata Sarr
Data Governance in Emerging Economies to Achieve the Sustainable Development Goals
Senegal Country Report Based on the Workshop Shaping Data Sharing Policies in the Agricultural and the Financial Services Sector (Dakar, March 16-17, 2022)
Max Planck Institute for Innovation & Competition Research Paper No. 24-05

It was based on the results of a workshop that took place in Dakar (Senegal) in March 2022. This was part of the broader international project "Data Governance in Emerging Economies to Achieve the Sustainable Development Goals (SDGs)", which examines the opportunities and possibilities offered by data policy to achieve the United Nations' Sustainable Development Goals.

Structured into four distinct parts, the report provides an exhaustive evaluation of Senegal's regulatory landscape concerning data access and sharing (Part I), laying the groundwork for a detailed examination of the alignment of these regulations with SDGs. It then focuses on the agricultural sector's data-sharing practices and their potential contributions to economic growth and sustainable development (Part II), followed by an exploration of the challenges and opportunities in data governance for financial services in the digital era (Part III). Part IV synthesizes the workshop's discussions, offering valuable insights, conclusions, and forward-looking recommendations.

This scholarly endeavor contributes significantly to the ongoing discourse surrounding data governance and its pivotal role in realizing the SDGs. The nuanced analysis and insights presented herein serve as a valuable resource for policymakers, academics, and practitioners operating at the intersection of data governance, development, and sustainability. Moreover, the outlined recommendations and prospective research agenda provide a roadmap for our future endeavors aimed at advancing data governance in emerging economies, aligning with the vision of the UN AI Advisory Board to govern AI for humanity.

Mor Bakhoum, Begoña Gonzalez Otero, Jörg Hoffmann, Minata Sarr
Data Governance in Emerging Economies to Achieve the Sustainable Development Goals Senegal Country Report Based on the Workshop Shaping Data Sharing Policies in the Agricultural and the Financial Services Sector (Dakar, March 16-17, 2022)
Max Planck Institute for Innovation & Competition Research Paper No. 24-05

He asks what exactly these goals mean and to what extent they can be meaningfully combined. Richter goes on to elaborate on specific reform options that would carefully bring about a paradigm shift. Finally, he advocates that the law should grant individual rights to the publication of information and the provision of data, because such rights assume fundamental functions in a free and digital society.

The article begins with an in-depth analysis of existing open data regulations and transparency laws in Germany. The results of the analysis and discussion are then presented in seven theses as practical recommendations for action. In doing so, Richter suggests two possible variants: The enactment of a federal transparency law, referred to as a "small solution," with "open data extension" and corresponding entitlements. In a more comprehensive "big solution", a public interest-related entitlement to Open Data under Section 12a EGovG would be enshrined in law in addition to the small solution.

Heiko Richter
Transparenzgesetz des Bundes und „Rechtsanspruch auf Open Data“ Konzeptionelle Perspektiven jenseits der Neuerfindung des Rades
(Federal Transparency Law and “Right to Open Data”: Conceptual Perspectives Beyond the Reinvention of the Wheel)
Max Planck Institute for Innovation & Competition Discussion Paper No. 22

In the podcast, he also shares some strategies we can use to overcome the influence of urgency and regret in our shopping behavior.

Timm Opitz is Junior Research Fellow and doctoral student in the economics department Innovation and Entrepreneurship Research of the Institute. His research focuses on entrepreneurship, behavioral market design, and developmental psychology.

Perceived urgency and regret are common in many sequential search processes. Sellers often pressure buyers in search of the best offer, both time-wise and in terms of potential regret of forgoing unique purchasing opportunities. Theoretically, these strategies result in anticipated and experienced regret, which systematically affect search behavior and thereby distort optimal search. In addition, urgency may alter decision-making processes and thereby the salience of regret.

To understand the empirical relevance of these aspects, Timm Opitz and his coauthors study the causal effects of regret, urgency, and their interaction on search behavior in an experiment. Empirically, they find that anticipated regret does not affect search behavior either with or without time pressure, while experienced regret leads to systematic adjustments in search length. Urgency reduces decision times and perceived decision quality, but does not generally alter search length. Only very inexperienced customers buy earlier when pressured. Thus, consumer protection measures against pressure selling tactics can help inexperienced consumers in particular.

Go directly to the Podcast.

Click here to access the full publication:

Klimm, Felix; Kocher, Martin G.; Opitz, Timm; Schudy, Simeon A. (2023).
Time Pressure and Regret in Sequential Search
Journal of Economic Behavior & Organization, 206, 406-424

The 600-page publication is the completion of a two-and-a-half-year project. More than 20 Ukrainian legal scholars were involved in the project, and their contributions cover a broad range of topics. The holistically designed volume aims to make the development and current state of Ukrainian law accessible and visible to the international research community. In addition to promoting academic discourse, the book aims to appeal to policy-makers. Thus, the contributions discuss and elaborate on legal policy reform proposals.

Recent legal developments in Ukraine have been extraordinarily dynamic. Not least as a result of the Association Agreement between Ukraine and the EU concluded in 2014, Ukrainian and competition and intellectual property law have undergone significant changes. The study examines theoretical aspects of legal harmonization as well as actual developments in the areas of international trade law, antitrust and unfair competition law, intellectual property law and copyright law. The spectrum of topics ranges from the “Europeanisation” of Ukrainian antitrust law and the regulation of the digital economy under antitrust law to access to medicines and the significance of geographical indications to the reform of collecting societies and the protection of artificial intelligence under intellectual property law.

With the aim of presenting a reference book, the authors collaborated intensively across institutional and national borders. It is owing to the authors’ perseverance and confidence that the manuscript could finally be completed in late summer 2022 in the midst of the turmoil of war. For the Institute, in addition to the editor, Moritz Sutterer, Daria Kim, Sophia Sorg and Claudia Dalmau Gomez were involved in the project, which was also accompanied by an online and a face-to-face workshop in Kyiv in October 2021. Many personal contacts were established in the course of the project.

Competition and Intellectual Property Law in Ukraine is published by Springer as part of the series MPI Studies on Intellectual Property and Competition Law. It is available for download via Springer-Link as PDF and EPUB. The print version is available in bookshops.