A Carbon Price by Another Name May Seem Sweeter: Consumers Prefer Upstream Offsets to Downstream Taxes

41 Pages Posted: 14 Mar 2017 Last revised: 3 Aug 2017

See all articles by David J. Hardisty

David J. Hardisty

Sauder School of Business

Alec Beall

University of British Columbia (UBC) - Department of Psychology

Ruben N. Lubowski

Environmental Defense Fund

Annie Petsonk

Environmental Defense Fund

Rainer Romero-Canyas

Environmental Defense Fund

Date Written: March 11, 2017

Abstract

Consumers are influenced, not only by prices, but also by how those prices are labelled, and by the policies that undergird those prices. Steps to limit carbon emissions, including putting a “price” or a “limit” on emissions, can be undertaken in a variety of ways, and these policies are associated with different labels, including carbon "taxes", "permits", or "offsets." Furthermore, the emissions can be regulated at many different points in the production and usage system: "upstream" regulations are applied to the extraction and importation of fossil fuels, while "downstream" regulations are applied to the sale of products and services. From a conventional economic standpoint, these points of regulation should have roughly equivalent impacts on carbon emissions. However, the impact of different policy choices and of "upstream" vs "downstream" frames on consumer perceptions and preferences is largely unknown. In several studies examining consumer preferences in the airline industry, we find that consumers respond significantly more favorably to a description of upstream offsets than to other frames such as downstream taxes. Furthermore, these framing differences are moderated by political ideology, such that Republicans show a particular distaste for downstream taxes.

JEL Classification: M31

Suggested Citation

Hardisty, David J. and Beall, Alec and Lubowski, Ruben N. and Petsonk, Annie and Romero-Canyas, Rainer, A Carbon Price by Another Name May Seem Sweeter: Consumers Prefer Upstream Offsets to Downstream Taxes (March 11, 2017). Available at SSRN: https://ssrn.com/abstract=2931606 or http://dx.doi.org/10.2139/ssrn.2931606

Alec Beall

University of British Columbia (UBC) - Department of Psychology ( email )

Canada

Ruben N. Lubowski

Environmental Defense Fund ( email )

New York, Nat'l Headquarters
257 Park Avenue South
New York, NY 10010
United States

Annie Petsonk

Environmental Defense Fund ( email )

1875 Connecticut ave
257 Park Avenue South
Washington, DC 20009
United States

Rainer Romero-Canyas

Environmental Defense Fund ( email )

1875 Connecticut ave
257 Park Avenue South
Washington, DC 20009
United States

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