Learning about Negative Externalities and Support for a Carbon Tax

• In Event: Carbon Pricing Politics and Politics

Abstract

Climate change is one of the most pressing issues facing the world and its negative impacts have already started materializing. As carbon dioxide (CO2) concentration in the atmosphere continues to increase, it is critical for policy makers to take action to reduce greenhouse gas emissions. However, despite the urgency, climate action has not been adequate and the issue has become one of the most polarized across the political spectrum in many countries, including Canada and the United States. Many strategies have been proposed to overcome this polarization and build support for climate mitigation policy. One such strategy, the results of which are so far mixed, consists in using messages that focus on co-benefits of policies that also address climate change (Feldman and Hart, 2018; Lauren Feldman, 2018; Mossler et al., 2017; Petrovic, Madrigano, and Zaval, 2014). This could for instance mean using messages that stress how reducing emissions helps fight air pollution rather than underlining the climate change benefit. Another strategy may be to make the economic benefits of climate change mitigation more salient. While polarization may not be easy to overcome with political messages or on ethical grounds, making it about pocketbook evaluations may reduce some of the opposition.
This is particularly relevant for a case like climate change, since at the basis of climate action is the understanding of the economic concept of negative externality: Economic actors do not directly bear the climate change-related costs associated with the emissions that they can dump free of charge into the atmosphere; consequently, they emit too much greenhouse gases. While political solutions are hard to implement, because of polarization and conflicts of interest among other reasons, the economic solution is actually quite trivial and it involves putting a higher price on things that cause harm, such as a pollution or carbon tax. This means that government intervention can actually lead to an increase in social welfare relative to the market equilibrium. Economists of all stripes overwhelmingly agree on this. According to multiple polls of economists, support for policies that would put a price on emissions of carbon dioxide and other greenhouse gases, in particular for a carbon tax, is nearly universal. While climate change is the ultimate case of a negative externality, examples of these market failures abound: from passive smoking, to traffic congestion, to air, water, or noise pollution.
Since the extreme polarization on climate change makes any communication on the issue potentially ineffective, one strategy would be to illustrate the concept of negative externality using an alternative framing, for example emphasizing pollution rather than climate change. While it is not clear whether people understand the difference between conventional air pollution (such as smog, including particulate matter, nitrogen oxides) and carbon pollution, air pollution carries a negative connotation and is much less polarized than climate change (Bickerstaff and Walker, 2001; Mossler et al., 2017). Air pollution is very frequently mentioned as a key cause of climate change in the climate change literature (Bostrom et al., 2012) and CO2 is considered a pollutant under the Clean Air Act. For these reasons, this framing might help the climate change cause, both through increasing support for action against air pollution and potentially also increasing support for a carbon tax, once the welfare effects of a corrective tax in the presence of a negative externality become clear.
In this paper I use a survey experiment in Canada where I manipulate information on the negative externalities of pollution to then infer its effects on policy support for a carbon tax, the latter being the one most often associated with climate action. The control group sees no information treatments and is only asked whether they support a carbon tax. The treatment group sees a short non-partisan cost-benefit exercise which outlines the welfare effects of a negative externality, before and after the introduction of a corrective tax. My hypothesis is that those who learn about and understand the mechanisms of negative externalities in the context of pollution should then be more likely to support a carbon tax. The mechanisms that I anticipate would explain the treatment effects are an increase in the salience of the economic dimension of climate change mitigation, and a change in the perceived costs and benefits of a corrective tax.

Author

• Beatrice Magistro, California Institute of Technology