Preferences for Distributional Impacts of Climate Policy

What role do people think distributional aspects should play in the design of climate policy? The literature assessing climate policies has shown that assumptions regarding peoples’ distributional preferences for climate change policy impacts are central for policy assessment, but empirical evidence for such preferences is lacking. We design a discrete choice experiment that varies how climate policies affect the income of future generations living in three geographical regions, with distinctly different current and predicted future income levels. The experiment is implemented on a sample of the Danish population and preferences are modelled in a latent class model. Our results show that a small majority of the sample (60%) hold preferences consistent with inequity aversion with respect to future income effects of climate policies across regions. For the same group, we find that preferences for co-benefits for current generations reflect a form of altruism, but not inequity aversion. In both cases, the altruistic aspects are moderated by an element of preferences for positive outcomes in own region too. The remaining classes display preferences with a varying focus on impacts in their own region or simply no support for further climate policy. Our results provide some support for the inclusion of social preferences regarding distributional effects of climate change policies in policy assessments, and hence for the significant impact on policy, this inclusion will have.