A tax can nudge: The impact of an environmentally motivated bonus/malus fiscal system on transport preferences

Bonus-malus taxes appear to have been successful in encouraging people to change to less polluting travel options in France (e.g. the tax on large and small engined cars). We hypothesize that they have three possible effects on consumer behaviour. The positive effects are: (1) a price effect (the less polluting option is subsidized and the polluting option is taxed); and (2) a social norm effect (the less polluting option is classified as pro-social and the polluting option as antisocial). The negative effect (3) is that they may decrease intrinsic motivation (crowding out). We provide an initial test of this tripartite model using survey data on students given a choice between taking the plane or the train between Toulouse to Paris. The first study shows that imposing a hypothetical bonus-malus tax has both a price effect (relative to a control condition where only the norm justifying the tax is presented) and a norm effect (relative to a control condition in which only the corresponding price difference is presented without mention of the tax). The second study presents a set of choices where the environmental norms and price differences are held constant, but the size of the contribution of the bonus-malus tax to the final price of each option is varied. This study confirms our prediction that a larger bonus-malus subsidy/tax reduces propensity to choose the less polluting option (i.e. the train). As the positive effects outweigh the negative effects in most of the choices studied, we conclude that bonus-malus taxes constitute a promising policy instrument.