Utah is growing quickly. According to the Kem C. Gardner Policy Institute, the state is projected to reach five million people by 2050. With that growth comes more energy use and more cars on the road. While positive for the economy, this poses a particular problem with regard to air pollution. During the winter, the Wasatch Front suffers from severe inversions, where cold air traps air pollution at the bottom of the valley, making the mountains disappear and turning the air into thick, unpleasant smog. One potential solution to this crisis is the use of a carbon tax (CT). According to economic theory, the purpose of a CT is to raise the price of carbon to match the social cost, which is higher than the market price due to the negative externalities from carbon emissions, such as air pollution and climate change. Producers pass along the increased cost to consumers in the form of higher gasoline and electricity prices, which should (in theory) incentivize individuals to consume less of those products, either by driving less, transitioning to electric vehicles or being more conservative with their energy use. Thus, carbon emissions would decrease, and the air would be cleaner overall.
Viability
To test this theory, a CT would have to be implemented in Utah, which does not seem politically viable at first glance. However, there is potential. The Clean the Darn Air campaign is currently gathering signatures to include a CT on the 2024 ballot. This initiative inspired my working paper, “The Willingness-to-Pay for a Carbon Tax in Utah.” As the name suggests, I estimate the WTP for a CT in Utah by running a contingent choice experiment survey (CE). A CE presents individuals with choices between two hypothetical programs with varying attributes and levels. In my survey, individuals were faced with two different carbon taxes that varied by the cost of the tax—ranging from an at-the-pump increase of $0.04-$0.36 per gallon of gasoline—and the use of tax revenues (see example question below). This type of survey has been used to study the acceptability of a CT in other countries, such as Sweden, Switzerland, Turkey, Australia and Norway, but my research is the first of its kind focused on Utah (see Brannlund and Persson, 2012; Carattini et al., 2017; Gevrek and Uyduranoglu, 2015; M. Hammerle et al., 2021; Saelen and Kallbekken, 2011). In general, these studies found that individuals prefer a CT that implements environmental and progressive uses of the revenue in addition to a low tax price.
Results
The survey was conducted over two weeks in early April 2022 using the online survey website Prolific, and it received 112 responses from Utah residents. After weighing the data to reflect Utah’s population political demographics (using the method found in Ben-Akiva, M., Lerman, S. S. (1985), page 238), I used a conditional logit regression model to estimate the coefficients and WTP. The results show that Utahns would be willing to pay a per gallon carbon tax of $0.26, $0.16 and $0.08 more than the status quo if revenues are used to eliminate sales tax on grocery store food, clean local air pollution, and fund clean energy development, respectively. Additionally, the coefficient on tax cost is negative, indicating that individuals prefer a CT with a lower tax rate. These results are statistically significant and indicate that with a focus on these areas, a carbon tax would be acceptable to many Utahns.
Constraints
One drawback of the method used is that it does not allow for combinations of options into a policy bundle; the dollar amounts provided can be used to rank the options but cannot merge into an overall WTP. Despite this limitation, this research provides a roadmap toward effective, politically feasible carbon tax policy design for the public and policymakers alike.
Conclusion
As Utah faces unprecedented population growth, initiatives like Clean the Darn Air and other environmental programs must be part of the conversation, especially in the face of worsening air pollution and climate change. By prioritizing sustainable growth now, we can make Utah a better place to live for ourselves and future generations. Citations:
Ben-Akiva, M., Lerman, S. R. (1985). Discrete Choice Analysis: Theory and Application to Travel Demand. The MIT Press.
Brunnland, R., Persson, L. (2012). To tax, or not to tax: preferences for climate policy attributes. Climate Policy, 12(6). https://doi.org/10.1080/14693062.2012.675732
Carattini, S., Baranzini, A., Thalmann, P., Varone, F., Vöhringer, F. (2017). Green Taxes in a Post-Paris World: Are Millions of Nays Inevitable? Environmental and Resource Economics, 68, 97-128. https://doi.org/10.1007/s10640-017-0133-8
Gevrek, Z.E., Uyduranoglu, A. (2015). Public preferences for carbon tax attributes. Ecological Economics, 118, 186-197. https://doi.org/10.1016/j.ecolecon.2015.07.020
Hammerle, M., Best, R., & Crosby, P. (2021). Public acceptance of carbon taxes in Australia. Energy Economics, 101. https://doi.org/10.1016/j.eneco.2021.105420
Kem. C Gardner Policy Institute. (n.d.). State and County Projections. Retrieved May 12, 2023, from https://gardner.utah.edu/demographics/population-projections/
Saelen, H., & Kallbakken, S. (2011). A choice experiment on fuel taxation and earmarking in Norway. Ecological Economics, 70(11), 2181-2190. https://doi.org/10.1016/j.ecolecon.2011.06.024