The social multiplier of environmental policy: Application to carbon taxation

Théo Konc*, Ivan Savin, Jeroen C.J.M. van den Bergh

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

We analyze the effectiveness of environmental policy when consumers are subject to social influence. To this end, we build a model of consumption decisions driven by socially-embedded preferences formed under the influence of peers in a social network. This setting gives rise to a social multiplier of environmental policy. In an application to climate change, we derive Pigouvian and target-achieving carbon taxes under socially-embedded preferences. Under realistic assumptions the social multiplier is equal to 1.30, allowing to reduce the effective tax by 38%. We show that the multiplier depends on four factors: strength of social influence, initial taste distribution, network topology and income distribution. The approach provides a basis for rigorously analyzing a transition to low-carbon lifestyles and identifying complementary information and network policies to maximize the effectiveness of carbon taxation.

Original languageEnglish
Article number102396
JournalJournal of Environmental Economics and Management
Volume105
DOIs
Publication statusPublished - Jan 2021

Keywords

  • Carbon pricing
  • Climate policy
  • Endogenous preferences
  • Externality taxation
  • Social network

Fingerprint

Dive into the research topics of 'The social multiplier of environmental policy: Application to carbon taxation'. Together they form a unique fingerprint.

Cite this