Tax or no tax? Preferences for climate policy attributes

Today, many countries around the world respond to the global warming and its consequences with various policy instruments such as e.g. taxes, subsidies, emission permit trading, regulations and information campaigns. In the economic literature, policy instruments have typically been analyzed with respect to efficiency, while little effort has been put on public preferences for these instruments. In this paper, an Internet-based choice experiment is conducted where respondents are asked to choose between two alternative policy instruments that both reduce the emissions of CO2 by the same amount. The policy instruments are characterized by a number of attributes; a technology-effect, an awareness-effect, cost distribution, geographic distribution and private cost (presented in more detail in the paper). By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes. Half of the respondents are faced with instruments labeled by ‘tax’ and ‘other’, whereas the other half are faced with unlabeled instruments. As for the label, the results show that people dislike the ‘tax’. The results also show that people prefer instruments with a positive effect on environmentally-friendly technology and climate awareness. A progressive-like cost distribution is preferred to a regressive cost distribution, and the private cost is negatively related to the choice. Finally, the results indicate that Swedes want the reduction to take place in Europe but not necessarily in Sweden.