With increasing concern about climate change there have been many calls recently to increase direct government subsidies for R&D spending on climate change related research. While governments in many industrialized countries have put a number of different schemes in place, spending still falls short of the doubling in spending levels many experts are calling for. Concern for climate change has equally made so-called voluntary offsetting schemes popular, ranging from tree planting projects to subsidies for the purchase of energy saving light bulbs for schools in developing countries. In this paper we use a choice modeling approach to investigate the feasibility of channeling some of these ‘charitable’ contributions to climate change projects into R&D spending.

Looking at aggregate figures this seems sensible. For example, in the UK, aggregate government spending on energy related R&D and private spending on voluntary offsetting are almost identical. A key difference between typical offsetting schemes and spending on R&D is however the uncertain impact on CO2 pollution of the latter. At least on paper, a tree planting project offers a clear account of how much CO2 is avoided: simply use the amount of CO2 a tree ‘breathes’ over its lifetime. With spending on R&D any CO2 reductions are more uncertain and in the future although they might potentially be much larger. The feasibility of an ‘innovation offsetting’ scheme consequently depends on the perception of this future carbon reduction potential and the risks involved among typical participants in carbon offsetting.

Using a web-based choice experiment survey we investigate public preferences for innovation offsetting. Specifically, respondents were presented with hypothetical scenarios for offsetting the carbon emissions from their leisure and business flights in which they could: i) buy a standard, verified offset, which promised to save a fixed amount of carbon; ii) buy an 'innovation offset', which contributed to a fund providing grants for carbon-reducing R&D; or iii) not buy any offset. From scenario to scenario we varied the proportion of carbon emissions saved by the conventional offset option, the area of research funded by the innovation offset (out of a total of 10 possible research areas such as energy efficiency, bio-fuels, renewable energy, nuclear technologies, carbon capture and storage etc.) and the prices of the offsetting options.

Preliminary results show a significant discrepancy between offsetting behaviour in leisure and business flights and a marked difference in willingness to pay between the various R&D areas available. To our knowledge, this is the first ever study to investigate demand for offsetting schemes that invest in carbon-reducing research and innovation.