The economics of climate change with endogenous preferences

Linus Mattauch, Cameron Hepburn, Fiona Spuler and Nicholas Stern

Resource and Energy Economics, 2022, vol. 69, issue C

Abstract: Avoiding unmanageable climate change implies that global greenhouse gas emissions must be reduced rapidly. Carbon prices and technological development are essential to deliver such reductions. Changes in preferences, however, are rarely considered, even though other major socioeconomic transitions – such as those from reducing smoking and drink-driving – have succeeded partly because preferences have changed. This article examines the impact of climate policy-induced changes in consumers’ preferences. We show that low-carbon policies could be better designed if it is recognised that preferences can be endogenous to such policies. For instance, carbon taxes must be adjusted, if they crowd-in or -out social preferences, to achieve a given target. Further, when the urban built environment changes mobility preferences, the value of low-carbon infrastructure investments can be underestimated if such effects are ignored. Third, policy-induced changes in preferences for active travel and plant-based diets could increase the net benefits of the transition to zero emissions.

Keywords: Climate change; Carbon pricing; Endogenous preferences; Crowding-in; Transport infrastructure; Health co-benefits (search for similar items in EconPapers)
JEL-codes: A12 D91 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: The economics of climate change with endogenous preferences (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:69:y:2022:i:c:s092876552200029x

DOI: 10.1016/j.reseneeco.2022.101312

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