Abstract
This research explores the dynamic relationship between the carbon tax and consumer decisions in the automotive sector, focusing on understanding the underlying drivers of vehicle choice. Followed by environmental concerns, carbon taxation has emerged as a policy lever to mitigate greenhouse gas emissions. In this paper, we use an experimental study to elucidate whether individuals are driven by a commitment to environmental sustainability or tax optimization strategies when making vehicle selections. We use statistical methods to determine the importance of different variables in the model's predictability. Our numerical analysis exhibits significant variations among consumers' preferences and responses to increased gas prices or carbon taxation. In addition to the general statistical analysis, using the comparative methods, we demonstrate that the consumers' choices differ in two scenarios: (i) carbon taxation and (ii) a cost-equivalent increase in gas price. For example, with a 95 percent confidence level, we rejected the null hypothesis that the choice of vehicle among the consumer age group 45–54 is cost-driven and independent of a cost-equivalent increase in gas price. Our findings provide valuable insights into the effectiveness of carbon taxes in promoting sustainable transportation decisions. In conclusion, this study shows that implementing carbon tax regimes influences customers beyond the dollar value of driving a car, suggesting the presence of unobservable factors such as personal preferences toward environmentally friendly policies. Furthermore, our research identifies several classes of individuals that differ in their responses to carbon tax, highlighting the need for policymakers to consider demographic and socioeconomic factors when designing and implementing such policies.
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