Individual Discount Rates and Climate Change: Is Discount Rate Associated With Support for a Carbon Tax?

Abstract

The issue of climate change is often framed as one in which contemporary actions, often with affixed costs, are necessary in order to prevent even greater costs being paid during a period in the future. Under such a framework it is thus necessary to calculate the rate in which future benefits are discounted to reflect current values. In this paper we examine how individual level discount rates affect their support for a policy tool that incurs contemporary costs in an effort to prevent future environmental damages. We find that individuals with higher discount rates are significantly less likely to support the imposition of a carbon tax in comparison with individuals that have lower discount rates. Even when controlling for other individual level attributes such as party affiliation a person’s rate for discounting the future is shown to be a strong predictor of their support for a carbon tax.

Empirical Research of Public Acceptance on Environmental Tax: A Systematic Literature Review

“…Agrawal et al [70] conclude that white voters were less likely than non-whites to support environmental taxes. In contrast, Amdur et al [71] show that nonwhite individuals are significantly less likely to support a carbon tax than Caucasians. A carbon tax policy that includes health insurance and free college builds more support for African Americans and Hispanics than white [16].…”

“…The majority of studies show that younger people give more support than older citizens (e.g., [31,60,68]). In contrast, Agrawal et al [70], Amdur et al [71], and Thalmann [55] found the older people have more support toward environmental taxes. At the same time, Hammar and Jagers [68] explains that the 31-60 age group is more negative than other age groups.…”

“…Rhodes et al [47] also found a positive and significant relationship between high biospheric values with public acceptability for climate policies. Individual preferences regarding carbon taxes may also be substantially driven by personal valuation of the future-people with a high discount rate, which highly value the future compared to the present, are more likely to support a carbon tax [71]. In contrast, Kim et al [37] do not find a correlation between infringement on freedom with environmental tax support from respondents in the US and UK.…”

“…Political value orientation is the most tested variable in the Governance theme, where 23 qualitative studies examined the relationship between partisanship with public acceptability, which indicates tax is a politically related agenda requiring strong support from the public. Many of the studies were conducted in the US and conclusively showed a significant relationship between the variables [32,70,71]. Specifically, Democrats were found to have more support on carbon tax than the Republicans and Independents [36,53,67,69].…”

Party Elites or Manufactured Doubt? The Informational Context of Climate Change Polarization

“…Second, these approaches do not easily address the fact that Republican supporters were once as likely to believe climate science as Democrats (Krosnick et al, 2000). Last, it is peculiar that the most market-friendly way to reduce emissions, carbon pricing, is much less popular among Republicans than Democrats, and this is true even with revenue recycling (Amdur, Rabe, & Borick, 2014). In broader strokes, most people who label themselves as very conservative are anything but on many fiscal issues (Barber & Pope, 2018; Drutman, 2017).…”