Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: Several countries are responding to the climate change threat with various policy measures (e.g., taxes, permit trading, regulations, information campaigns, etc). While the effectiveness of different measures (instruments) has been studied extensively, very little research exists related to public preferences for alternative measures. This paper describes the results of a pilot study to determine whether a choice experiment might be a feasible approach for measuring preferences for carbon dioxide reduction policies, while ensuring careful consideration of the budget constraint facing households. We focus on estimating the public’s marginal utilities and implicit prices for a select group of attributes that describe climate policy measures in general. The results from the pilot study indicate that when respondents trade-off the cost of alternative and unlabeled policy measures, they are willing to pay for those that encourage (1) the development of environmentally-friendly technology and (2) climate awareness among the Swedish population. Finding (1) could be interpreted to mean public support for market-based measures (e.g., taxes and permit trading) while finding (2) seems to support the use of information in the design of climate policy measures in order to encourage carbon dioxide-reducing behavior. Finally, our pilot study assumed that respondents’ preferences for the cost-sharing burden (equity) of measures might be defined in terms of an individual’s ability to pay. Given this assumption, our results indicate weak preferences for non-regressive cost distribution, but progressive cost distribution had no effect on choice. We offer several possible conclusions from this preliminary investigation into climate policy preferences.

Keywords: market-based mechanisms; information effects; equity; choice experiment; preferences

JEL-codes: Q48; Q50; Q54; Q55

26 pages, April 1, 2009

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