Climate Change: Are Marylanders in favor of a Carbon Tax?

Inspired by Michael Greenstone’s article “Americans Appear to be Willing to Pay for a Carbon Tax Policy” (published in the New York Times on 15 Sept. 2016), students in Anna Alberini and Jeff Hunt’s AREC 454 –The Economics of Climate Change developed a brief questionnaire to elicit the public’s support for a carbon tax and administered it to a sample of Maryland Day attendees on 29 April 2017. Pictured above, left to right, are Peter Kim, Brian Glenn, Louisa Baltodano, Mudi Qin (in the front), Ke Lan, and (in back at right) Michael Fangmeyer.

In addition to eliciting opinions about climate change, energy and emissions, the questionnaire briefly described a “tax on fossil fuels or electricity that was generated using fossil fuels.” It also explained that if such a tax was adopted, utilities that use coal or natural gas to produce electricity would pay that tax, and consumers would also pay a portion of that tax based on the kilowatt-hours they consumer. Respondents were reminded that “the goal of this tax is to encourage utilities and consumers to switch towards energy produced with renewable sources, such as wind or solar.”

Each respondent was then asked if he or she would be in favor of this tax if the tax implied that his or her electricity bill would increase by $X each month. The exact dollar amount $X ranged from $2.20 to $15.70 a month and was assigned to the respondents at random. We computed the dollar amount on the basis of the consumption of electricity for the average American household and the average level of CO2 emissions per kWh of electricity for four hypothetical carbon tax levels ranging from $7 to $50 for each ton of CO2.

Recent research in public economics suggests that people may or may not be aware of certain taxes, depending on how visible and “salient” these are to them (Chetty et al., 2009). Many people do not know how many kilowatt-hours of electricity they use at their homes and do not know their  electricity tariff(s) either, so we crafted an additional question that asked respondents whether they would be in favor of the same carbon tax if it implied a certain increase in the price of gasoline. The increase ranged from 6 to 45 cents per gallon.

The students were able to gather 201 completed questionnaires. Eighty-five percent of the respondents were Maryland residents. “We approached people at four different location on campus, and found that people sitting on benches to rest or standing in line for food or one of the many Maryland Day attractions were very cooperative,” says Brian Glenn, one of the students who participated in this project. “We also explained that were UMD students doing a final project, and that helped.”     

The data collected through this pen-and-paper questionnaires were entered into a spreadsheet and subsequently statistically analyzed by the entire team—Louise Baltodano, Michael Fangmeyer, Brian Glenn, Peter Kim, Ke Lan, Chuanmudi Qin, Lucia Tarantino,  and Noam Weintraub.  The results of the study are summarized in Figure 1 below.

Figure 1. Percent of respondents support a carbon tax.

Economic theory and common sense suggest that the likelihood of supporting the carbon tax should decrease as the actual tax level increases. As shown in Figure 1, when the carbon tax was framed as an increase in the electricity bill, many respondents were in support of it. The percentage of respondents in favor of the tax was more than 70% for a carbon tax level up to $25 per ton of CO2, and declined to 53.70% (still a majority) for $50 per ton of CO2. The percentage of respondents in favor of the carbon tax when framed as a gasoline tax was about 3 to 8 percentage point less than that estimated from the electricity bill question.

At least at the levels of the carbon tax that we experimented with, there was therefore considerable support for such a policy tool to reduce greenhouse gas emissions. Caution is of course necessary when interpreting these findings. Noam Weintraub warns us that the sample of respondents intercepted at Maryland Day has relatively high household income levels: the median household income was $100,000, which is well above Maryland’s median household income ($69,200) and the national median household income ($51,900). They are also highly educated, with 75% of them indicating that they have a college degree or higher educational attainment. Brian Glenn also noted that some of the respondents were very eager to participate in the survey because they had to miss the climate change march scheduled for the same day in Washington, DC. As a result, the sample may be somewhat biased towards persons who are very concerned about climate change and whose willingness to support a carbon tax is higher than the average citizen’s.

The students generally enjoyed the experience. Ke Lan said that she send a picture of herself at Maryland Day to her parents in China, and that both she and her parents were very excited by her participation in this campus-wide event.