Social identity and carbon taxes

Abstract

We explore the idea that citizens' preferences for carbon taxes reflect not only their material self-interest but also concerns for certain social groups to which they feel part of, in line with recent empirical findings. We apply the social identity theory to a simple model of votes for a carbon tax (redistributed through uniform lump-sum transfers) and incorporate heterogeneity in carbon consumption technology, which gives rise to a new social category to which individuals can naturally identify. We show that identification along carbon consumption technologies explains opposition to the carbon tax from individuals who privately benefit from the policy. We determine the social identity equilibrium which imposes that voting choices and identification patterns are consistent with each others and show that a rise in the international price of energy may lead to both a citizens backlash against carbon taxes and the emergence of a new social identity movement based on carbon consumption technology. This result holds when inequalities between groups are strong. ,co-authored with Emeline Bezin (CREM, CNRS)