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Negative income shocks and the support of environmental policies: Insights from the COVID-19 pandemic

Andreas Löschel (), Michael Price (), Laura Razzolini () and Madeline Werthschulte

No 117, MEP Discussion Papers from University of Münster, Münster Center for Economic Policy (MEP)

Abstract: This study explores whether negative income shocks from the COVID-19 pandemic affect the demand for environmental policy. By running a survey in Germany in May 2020, we show that there is a large and negative correlation between the COVID-19 income shocks and the willingness to support green policies. Importantly, this relation is separate from the effect of long-run income. Building on this first evidence, our study provides directions for future valuation studies. Specifically, our results provide a proof of concept that welfare analyses based on willingness-to-pay estimates to assess the benefit of an environmental good or the cost of an environmental damage may be downward biased if temporary changes in income are not considered.

Keywords: COVID-19; Environmental policy; Income shock; Welfare analysis; Willingness topay (search for similar items in EconPapers)
JEL-codes: D61 Q51 Q58 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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