Individual Discount Rates and Climate Change: Is Discount Rate Associated With Support for a Carbon Tax?, Climate Change EConomics
The issue of climate change is often framed as one in which contemporary actions, often with affixed costs, are necessary in order to prevent even greater costs being paid during a period in the future. Under such a framework it is thus necessary to calculate the rate in which future benefits are discounted to reflect current values. In this paper we examine how individual level discount rates affect their support for a policy tool that incurs contemporary costs in an effort to prevent future environmental damages. We find that individuals with higher discount rates are significantly less likely to support the imposition of a carbon tax in comparison with individuals that have lower discount rates. Even when controlling for other individual level attributes such as party affiliation a person’s rate for discounting the future is shown to be a strong predictor of their support for a carbon tax.
Dale, Donald. 2015. Individual Discount Rates and Climate Change: Is Discount Rate Associated With Support for a Carbon Tax?. Climate Change EConomics. 6(4)