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Forming a Majority Coalition for Carbon Taxes under a State-Contingent Updating Rule

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  • McKitrick, Ross
  • Lee, Jamie

Abstract

Uncertainty and divergent expectations over global warming make it difficult to achieve a majority coalition supporting carbon taxes. We explore a state-contingent approach based on an updating rule that automatically assimilates new information rather than a pre-specified tax path. Agents form expectations which imply that the tax sequence correlates with their preferred price trajectory. We show that whereas greater variance in beliefs about future global warming undermines support for a static policy, the state-contingent proposal attracts majority support irrespective of the divergence of views, and even has robustness properties to strategic voting by dishonest agents.

Suggested Citation

  • McKitrick, Ross & Lee, Jamie, 2017. "Forming a Majority Coalition for Carbon Taxes under a State-Contingent Updating Rule," Strategic Behavior and the Environment, now publishers, vol. 6(4), pages 289-309, November.
    • Handle: RePEc:now:jnlsbe:102.00000071
    DOI: 10.1561/102.00000071
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    More about this item

    Keywords

    Carbon tax; State-contingent model; Majority voting; Climate change; Uncertainty;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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