Ambiguity Attitudes and Willingness to Pay for Climate Mitigation

Ambiguity attitudes, which refer to differences between decisions under risk (known probabilities) and uncertainty (unknown probabilities), are well-established in behavioral economics. Their implications have been increasingly recognized in environmental and climate change economics. However, most discussions about ambiguity in this domain have so far been confined to theoretical applications in normative climate policy analysis. Notably, there has been a lack of descriptive investigations into climate-related ambiguity attitudes, despite their potential relevance for understanding voluntary climate action and climate policy acceptance. The current study addresses this open empirical question by analyzing ambiguity attitudes in the climate context and exploring their link with willingness to pay (WTP) for climate change mitigation. We show that notwithstanding the normative arguments for higher mitigation effort under ambiguity aversion, the effect of ambiguity on people's preferred levels of mitigation may be in the opposite direction, suggesting a potential discrepancy between the prescribed and the publicly acceptable levels of mitigation effort.