Forming a Majority Coalition for Carbon Taxes under a State-Contingent Updating Rule

Ross McKitrick and Jamie Lee

Strategic Behavior and the Environment, 2017, vol. 6, issue 4, 289-309

Abstract: Uncertainty and divergent expectations over global warming make it difficult to achieve a majority coalition supporting carbon taxes. We explore a state-contingent approach based on an updating rule that automatically assimilates new information rather than a pre-specified tax path. Agents form expectations which imply that the tax sequence correlates with their preferred price trajectory. We show that whereas greater variance in beliefs about future global warming undermines support for a static policy, the state-contingent proposal attracts majority support irrespective of the divergence of views, and even has robustness properties to strategic voting by dishonest agents.

Keywords: Carbon tax; State-contingent model; Majority voting; Climate change; Uncertainty (search for similar items in EconPapers)
JEL-codes: D72 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Forming a Majority Coalition for Carbon Taxes Under a State-Contingent Updating Rule (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000071

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