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Revealed and Stated Preferences for CO2 Emissions Reduction: The Missing Link

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Document pages: 43 pages

Abstract: The aim of this paper is to assess consumers’ attitudes in monetary terms toward the avoidance of CO2 emissions in the transport sector, using a meta-analysis approach drawing on 30 primary studies. We compute the implicit price for the avoidance of a kilogram of CO2 emissions, named PCO2. Our novel approach combines results from revealed preferences of conventional vehicle drivers for fuel price variation and stated preferences expressed by consumers for alternative fuel vehicles. We compare data collected from two strands of literature. Operationally, we recover the opportunity cost of achieving CO2 emissions reduction from the price elasticity of demand for traditional fossil fuels transport. We interpret the fuel market price response as a signal to estimate the opportunity cost of driving reduction and the related CO2 emissions. Then, we analyze the willingness to pay (willingness to accept) for alternative fuel vehicles, estimating a measure of the cost of CO2 avoidance. Our findings show that contextual and individual characteristics influence the implicit price for CO2 emissions avoidance. This implicit price is on average positive in the case of revealed preferences studies, whereas it is negative in the stated preferences studies. Although there are some important geographical differences, our results show that fuel taxes can be considered as an important additional instrument for environmental policy.

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