22. The Price paradox

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Move to 21. The Transparency paradox <> Move to 23. The Expectations paradox

While planning to buy the perfect gift for a friend or family member, you are probably always reminded of the classic idea: the higher the price, the better the quality.

But when it comes to carbon credits, we are not buying presents; we are trying to save the climate. Here, it should be the other way around: Conventional wisdom suggests that to maximize climate impact, you should aim for the lowest-cost emission reductions—reducing more CO₂ for the same budget.

Economic theory further suggests that prices should rise as demand for carbon credits increases. As inexpensive emission reduction options gradually become scarce, you’d expect people to shift to more costly solutions, eventually funding even the most expensive projects.

Yet, paradoxically, reality doesn’t follow this logic. Instead, the “Christmas present” idea appears to apply. Some people view low-cost carbon credits with scepticism, suggesting low prices signal low quality, opening doors for greenwashing. Adding to the irony, this criticism reduces demand for carbon credits, lowering prices further as project owners scramble to recoup their investments. 

And the irony goes on: Some of the priciest carbon credits are considered “best quality,” but their high costs make it hard for buyers to offset all emissions. As a result, many abandon their offsetting ambition, leading to fewer emission reductions. 

So what to do when people dislike both inexpensive (“low quality!”) and expensive (“too costly!”) credits?

In this series, two leading authorities in carbon uncover the secrets and contradictions of an entire industry – in the most fun and engaging way. Through 32 curated Carbon Paradoxes, you'll learn everything essential about this field, starting with the tensions we must address to make environmental markets thrive.

This article is also published on carbonparadox.org. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.