The economics of climate change with endogenous preferences

Aug 1, 2023

Avoiding unmanageable climate change implies that global greenhouse gas emissions must be reduced rapidly. Carbon prices and technological development are essential to deliver such reductions. Changes in preferences, however, are rarely considered, even though other major socioeconomic transitions – such as those from reducing smoking and drink-driving – have succeeded partly because preferences have changed. This article examines the impact of climate policy-induced changes in consumers’ preferences. We show that low-carbon policies could be better designed if it is recognised that preferences can be endogenous to such policies. For instance, carbon taxes must be adjusted, if they crowd-in or -out social preferences, to achieve a given target. Further, when the urban built environment changes mobility preferences, the value of low-carbon infrastructure investments can be underestimated if such effects are ignored. Third, policy-induced changes in preferences for active travel and plant-based diets could increase the net benefits of the transition to zero emissions.

Publication details
Theme(s)
Net zero & sustainable development The urgency of zero
Type(s)
Research paper
Author(s)
Hepburn, Cameron
Year(s)
2022
Resource and Energy Economics

Latest news

Oxford Net Zero launches autumn webinar series
Oxford Net Zero launches autumn webinar series

Join us this autumn for a series of webinars led by Oxford Net Zero fellows! Read more

Professor Myles Allen appointed Fellow of the Royal Society
Professor Myles Allen appointed Fellow of the Royal Society

Professor Myles Allen appointed Fellow of the Royal Society Read more

Oxford Net Zero is Hiring – Join as Fossil Fuel Fellow
Oxford Net Zero is Hiring – Join as Fossil Fuel Fellow

Oxford Net Zero has an exciting opening for a Research Fellow on Net Zero for the Fossil Fuel Sector and non-stipendiary Research Fellowship at Kellogg College. We are seeking to appoint a Research Fellow on Net Zero for the Fossil Fuel Sector ... Read more

See more news and events