To tax, or not to tax: preferences for climate policy attributes

Abstract

Many countries around the world respond to global warming and its consequences with various policy instruments. In the economic literature, policy instruments have typically been analysed with respect to efficiency, but little effort has been expended to understand public preferences for these instruments. In an internet-based choice experiment to address this shortcoming, Swedes were asked to choose between two alternative hypothetical policy instruments, each of which reduces CO2 emissions by the same amount. The hypothetical policy instruments were characterized by a number of specific attributes. By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes. Half of the respondents are faced with choices labelled ‘tax’ and ‘other’, and the other half are faced with unlabelled choices (hypothetical instruments). The results show that Swedes tend to dislike the term ‘tax’ and show a preference for instruments with a positive effect on environment-friendly technology and climate awareness. A progressive-like cost distribution is preferred to a regressive cost distribution, and the private cost is negatively related to the choice of policy.