Emissions offsets remain an underutilized compliance instrument in California’s cap-and-trade program despite trading at substantial discounts—sometimes less than two-thirds the price of a permit. Many firms never purchase an offset, leaving significant cost savings on the table. Using compliance data from 2013-2020, I identify fixed transaction costs (e.g., risk premia or public relations concerns) as the primary barrier, and it is a substantial one: averaging between $220,000 and $835,000 (respectively, 10% and 38% of average spending on offsets). But this value is heavily skewed; median transaction cost estimates are between $37,000 and $56,000 (respectively, 13% and 19% of median spending on offsets), suggesting the average cost is driven by a few high-cost firms. Using the median cost estimates, I estimate that, in all, firms incurred between $19 and $95 million in transaction costs over the sample period; during the same period, the offsets market generated between $250 and $326 million.

Suggested Citation: Robinson, Willard, “Transaction Costs of Emissions Offsets: Evidence from California,” CEnREP Working Paper No. 26-003, June 2026, https://go.ncsu.edu/cenrep.wp.26.003.