Can Pigou at the Polls Stop US Melting the Poles?
74 Pages Posted: 17 Jun 2019 Last revised: 30 Jul 2021
Date Written: July 31, 2019
Economists recommend Pigouvian taxes as the most efficient way to fight climate change. Yet, carbon taxes are difficult to implement politically. To understand why, we study Washington State's two failed carbon tax referendums from 2016 and 2018—the first such votes in the United States. We find that average voters' opposition to the carbon tax can partly be explained by the anticipation of higher energy costs. Meanwhile, ideology—as measured by voting on other initiatives—explains 90% of variation in voting across precincts. These results suggest that ideology plays a crucial role in driving opposition to carbon taxes. We find that revenue recycling interacts with ideology: conservatives preferred the 2016 revenue-neutral policy, while liberals preferred the 2018 green-spending policy. Finally, we forecast that no other state is liberal enough to pass Washington's policies. Thus, opinion surveys showing majority support for the carbon tax can be misleading.
Keywords: pigouvian taxes, carbon taxes, voting behavior, willingness to pay, state environmental policy
JEL Classification: D72, H23, H71, H72, Q52, Q54, Q58
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