Strategic Behavior and the Environment > Vol 6 > Issue 4

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

Ross McKitrick, University of Guelph, Canada, ross.mckitrick@uoguelph.ca Jamie Lee, University of Guelph, Canada, jlee11@uoguelph.ca
 
Suggested Citation
Ross McKitrick and Jamie Lee (2017), "Forming a Majority Coalition for Carbon Taxes under a State-Contingent Updating Rule", Strategic Behavior and the Environment: Vol. 6: No. 4, pp 289-309. http://dx.doi.org/10.1561/102.00000071

Published: 29 Nov 2017
© 2017 R. McKitrick and J. Lee
 
Subjects
Environmental Economics:Climate Change,  Environmental Economics:Market-based Policy Instruments,  Public Economics:Environmental Taxation,  Environmental politics
 
Keywords
JEL Codes: Q54Q58H23D72
Carbon taxState-contingent modelMajority votingClimate changeUncertainty
 

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In this article:
Introduction
Voting on Taxes for Externalities and Public Goods
Voting on a Static Carbon Tax
Two-Period Case under a State-Contingent Tax
Dishonest Voting on a State-Contingent Tax
Conclusions
References

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.

DOI:10.1561/102.00000071