Willingness to pay for carbon abatement: institutional vs. retail investors in various contexts

We study how sustainability preferences differ between institutional asset owners, asset managers, and homeowners, focusing on their willingness to pay (WTP) for carbon abatement. While prior survey evidence on sustainable investing largely centers on retail investors’ stated motives, less is known about how professional investors and managers—who make sustainability decisions in practice—value carbon reductions when facing realistic trade-offs. Our game elicits WTP for a ton of carbon in two complementary ways: (1) through direct stated-preference questions and (2) through incentivized vignette choices that simulate realistically calibrated renovation decisions for representative US office or residential buildings. Comparing these elicitation methods allows us to measure how participants’ WTP to reduce carbon differs when it is explicitly presented as a carbon tax versus when it is implied through building renovation choices. We implement a between-subject design with four groups: (i) Asset managers, entities responsible for the day-to-day operations and asset management decisions, (ii) asset owners, institutional asset owner entities that own the asset but do not manage it directly (e.g., ABP, Norges), relying on third-party managers, (iii) asset owners and managers deciding on a residential renovation akin to their own home, and (iv) retail homeowners deciding on a renovation on their private property. This structure enables us to disentangle differences in the WTP gap across experience and expertise (institutional owner vs. asset managerial vs. homeowner), incentive settings (principal vs. agent), and socio-demographic characteristics. By combining elicitation modes with participant heterogeneity, our study sheds light on how professional experience and incentives shape the valuation of carbon reductions.