Environmental preferences and consumer behavior

This paper demonstrates that environment-conscious consumers have lower gasoline retail (tax-exclusive) price and excise tax elasticities, suggesting that they are less sensitive to changes in prices and taxes than their less environmental counterparts. These results on an American state-year dataset are robust to the use of two environmental proxies and to the instrumentation of gasoline retail prices. These findings support the existence of heterogeneous environmental preferences by demonstrating that certain consumers incorporate environmental ideology into their utility functions distinctly from income considerations. The implication that environmental preferences contribute to differential responsiveness to pecuniary signals has repercussions for the forecasting of consumer behavior and for the ease of implementation of environmental policy.