TY - BOOK

T1 - Climate Change and Social Preferences

T2 - Exploring Preferences for Distributional Outcomes of Climate Policy

AU - Svenningsen, Lea Skræp

PY - 2017

Y1 - 2017

N2 - A key insight from the scientific literature on climate change is that the projected impacts of climatechange are not expected to be equally distributed among nations. Developing regions are expectedto bear a larger share of the adverse impacts, compared to developed regions. This will havedisproportionate effects, as according to the theory of declining marginal utility of income,individuals living in poor regions will suffer a larger utility loss from a dollar worth of climatedamage relative to individuals living in rich regions who are subject to the same one dollar worth ofclimate damage. This concern can be integrated into the central policy assessment tool in thecontext of climate policy, which is the Social Cost of Carbon (SCC). The SCC captures theeconomic costs to societies that a marginal increase in greenhouse gas emissions today will have inthe future and is calculated by integrated assessment models, typically under the assumption of aglobal policy maker. Equity weights, also called distributional weights can be included in the SCCin order to give more weight to damages that befall poorer individuals, relative to those felt by morewell-off individuals. Given the current limitations of international cooperation on climate change,the chances of having one body/actor to direct climate policy at the global level seem dim -employing a national outlook and operating from the perspective of a national policymaker thusbecomes relevant. A national policymaker who wishes to account for distributional outcomesabroad can specify the SCC to include other-regarding, also called social preferences.The objective of this thesis is to explore the empirical foundation of accounting for distributionalsocial preferences in the context of climate policy. This is a relevant question to pursue for threereasons: 1) the empirical existence of distributional social preferences in the context of climatepolicy has not previously been explored, 2) the theoretical implications of a policymaker withdistributional social preferences, is a higher price on carbon emissions, which ceteris paribus willgenerate grounds for a more aggressive level of climate policy, and finally 3) the efficiency ofclimate policies requires a design founded on the actual preference structure of individuals. Aclimate policy that reflects the general public’s preferences towards distributional outcomes is morelikely to be accepted and thereby more efficient in attaining its goal.This PhD thesis consists of five papers that explore distributional social preferences in the contextof climate policy and is based on three separate data collections. The first data collection is basedon a standard discrete choice experiment (DCE) using tax as payment vehicle and includes a split totest the effect of valence-based framing. Papers 1, 3 and 5 are based solely on the first datacollection. The second data collection, which Paper 2 is based on, involves an incentivized DCEusing a real donation mechanism, while the third data collection is based on a standard DCE using adonation as a payment vehicle. The analysis in Paper 4 is based on all three data collections.Paper 1 presents a theoretically based characterization of distributional social preferences into twoproposed behavioural hypotheses and finds that a small majority of Danes exhibit distributionalsocial preferences reflecting inequity aversion, a finding which has been tested robust againstseveral sensitivity checks. The paper also presents evidence that a non-negligible share ofindividuals appears to signal a commitment to the climate cause, and that a small share ofrespondents prefers not to support climate policies at all. Paper 2 explores the characterization ofdistributional social preferences in an experimental context where individuals make actualdonations towards CO2 mitigation and adaptation projects. The results of this paper suggest anaverage tendency for individuals to hold distributional social preferences, which are likely to beheterogeneous in nature. Paper 3 investigates whether the systematic part of distributionalpreference heterogeneity can be linked to two behavioural drivers, 1) the individual’s expectationregarding the degree of climate change and 2) individual time preferences. The findings of thepaper suggest that both drivers can be used to further the understanding of distributional socialpreferences in the context of climate policy. The focus of Paper 4 is to explore how changes insurvey design influence the conclusions reached on individuals’ choice of climate policy. Thefindings indicate that elicitation format, bid range and type of payment vehicle can be potentialdrivers behind the observed differences in both preference structures and welfare estimates forclimate policy. Finally, Paper 5 investigates how valence-based attribute level framing influencesthe observed preference structure and welfare estimates for climate policy. The results suggest thatframing significantly influences the observed preference structure and the welfare estimates reveal asignificant spill-over effect on an unframed policy attribute.Taken together, this thesis suggests that a substantial share of the population considers thedistributional outcomes of climate policy to be of importance – a finding which is consistent acrossthe different experimental contexts. Moreover, these distributional concerns are likely to beheterogeneous in nature and relate to the individual’s expectation regarding the degree of climatechange as well as individual’s time preferences. This thesis also contributes to the literature onstated preference design, by confirming that several survey design features influence the observedinference from choice models in the context of a moral public good. In particular, this thesis findsthat framing climate policies in terms of gains or losses do not influence the role of distributionalconcerns, a framing that highlights loss, however, overall leads to a higher willingness to supportclimate policies. This thesis presents the following implications for future climate policy design: 1)it provides an argument for the inclusion of distributional concerns in climate policy design; 2)policymakers can enhance the support for climate policies by stressing the presence of co-benefits;3) loss framing will increase the support to climate policies, and finally; 4) policymakers shouldrecognise that support for climate policies will vary between different segments of the populatio

AB - A key insight from the scientific literature on climate change is that the projected impacts of climatechange are not expected to be equally distributed among nations. Developing regions are expectedto bear a larger share of the adverse impacts, compared to developed regions. This will havedisproportionate effects, as according to the theory of declining marginal utility of income,individuals living in poor regions will suffer a larger utility loss from a dollar worth of climatedamage relative to individuals living in rich regions who are subject to the same one dollar worth ofclimate damage. This concern can be integrated into the central policy assessment tool in thecontext of climate policy, which is the Social Cost of Carbon (SCC). The SCC captures theeconomic costs to societies that a marginal increase in greenhouse gas emissions today will have inthe future and is calculated by integrated assessment models, typically under the assumption of aglobal policy maker. Equity weights, also called distributional weights can be included in the SCCin order to give more weight to damages that befall poorer individuals, relative to those felt by morewell-off individuals. Given the current limitations of international cooperation on climate change,the chances of having one body/actor to direct climate policy at the global level seem dim -employing a national outlook and operating from the perspective of a national policymaker thusbecomes relevant. A national policymaker who wishes to account for distributional outcomesabroad can specify the SCC to include other-regarding, also called social preferences.The objective of this thesis is to explore the empirical foundation of accounting for distributionalsocial preferences in the context of climate policy. This is a relevant question to pursue for threereasons: 1) the empirical existence of distributional social preferences in the context of climatepolicy has not previously been explored, 2) the theoretical implications of a policymaker withdistributional social preferences, is a higher price on carbon emissions, which ceteris paribus willgenerate grounds for a more aggressive level of climate policy, and finally 3) the efficiency ofclimate policies requires a design founded on the actual preference structure of individuals. Aclimate policy that reflects the general public’s preferences towards distributional outcomes is morelikely to be accepted and thereby more efficient in attaining its goal.This PhD thesis consists of five papers that explore distributional social preferences in the contextof climate policy and is based on three separate data collections. The first data collection is basedon a standard discrete choice experiment (DCE) using tax as payment vehicle and includes a split totest the effect of valence-based framing. Papers 1, 3 and 5 are based solely on the first datacollection. The second data collection, which Paper 2 is based on, involves an incentivized DCEusing a real donation mechanism, while the third data collection is based on a standard DCE using adonation as a payment vehicle. The analysis in Paper 4 is based on all three data collections.Paper 1 presents a theoretically based characterization of distributional social preferences into twoproposed behavioural hypotheses and finds that a small majority of Danes exhibit distributionalsocial preferences reflecting inequity aversion, a finding which has been tested robust againstseveral sensitivity checks. The paper also presents evidence that a non-negligible share ofindividuals appears to signal a commitment to the climate cause, and that a small share ofrespondents prefers not to support climate policies at all. Paper 2 explores the characterization ofdistributional social preferences in an experimental context where individuals make actualdonations towards CO2 mitigation and adaptation projects. The results of this paper suggest anaverage tendency for individuals to hold distributional social preferences, which are likely to beheterogeneous in nature. Paper 3 investigates whether the systematic part of distributionalpreference heterogeneity can be linked to two behavioural drivers, 1) the individual’s expectationregarding the degree of climate change and 2) individual time preferences. The findings of thepaper suggest that both drivers can be used to further the understanding of distributional socialpreferences in the context of climate policy. The focus of Paper 4 is to explore how changes insurvey design influence the conclusions reached on individuals’ choice of climate policy. Thefindings indicate that elicitation format, bid range and type of payment vehicle can be potentialdrivers behind the observed differences in both preference structures and welfare estimates forclimate policy. Finally, Paper 5 investigates how valence-based attribute level framing influencesthe observed preference structure and welfare estimates for climate policy. The results suggest thatframing significantly influences the observed preference structure and the welfare estimates reveal asignificant spill-over effect on an unframed policy attribute.Taken together, this thesis suggests that a substantial share of the population considers thedistributional outcomes of climate policy to be of importance – a finding which is consistent acrossthe different experimental contexts. Moreover, these distributional concerns are likely to beheterogeneous in nature and relate to the individual’s expectation regarding the degree of climatechange as well as individual’s time preferences. This thesis also contributes to the literature onstated preference design, by confirming that several survey design features influence the observedinference from choice models in the context of a moral public good. In particular, this thesis findsthat framing climate policies in terms of gains or losses do not influence the role of distributionalconcerns, a framing that highlights loss, however, overall leads to a higher willingness to supportclimate policies. This thesis presents the following implications for future climate policy design: 1)it provides an argument for the inclusion of distributional concerns in climate policy design; 2)policymakers can enhance the support for climate policies by stressing the presence of co-benefits;3) loss framing will increase the support to climate policies, and finally; 4) policymakers shouldrecognise that support for climate policies will vary between different segments of the populatio

UR - https://soeg.kb.dk/permalink/45KBDK_KGL/fbp0ps/alma99122355072905763

M3 - Ph.D. thesis

BT - Climate Change and Social Preferences

PB - Department of Food and Resource Economics, Faculty of Science, University of Copenhagen

ER -