Climate Change, Population Ageing and Public Spending: Evidence on Individual Preferences

Abstract

Economic theory as well as empirical research suggest that elderly people prefer public spending on policies yielding short-term benefits. This might be bad news for policies aimed at combating climate change: while the unavoidable costs of these policies arise today, the expected benefits occur in the distant future. Drawing on data from over 12,000 households and using the ordered logit and the generalized ordered logit model, we analyze whether attitudes towards climate change and climate policies as well as public spending preferences differ with respect to age. Our estimates show that elderly people are less concerned about climate change, but more concerned about other global challenges. Furthermore, they are less likely to support climate-friendly policies, such as the subsidization of renewables, allocate less public resources to and have lower willingness-to-pay for environmental policies. Thus, our results suggest that the ongoing demographic change in industrialized countries may undermine climate policies.