April, 2009

'Doing My Part' to Save the Global Commons?

Key materials

Information about collectively-created problems, such as air pollution, may elicit voluntary changes to consumer behavior that at least partially offset the cause of the problem.  We show that increases in information about climate change are associated with statistically and economically significant decreases in expenditure on gasoline, controlling for gasoline prices and income. We simultaneously provide updated estimates of the short run price and income elasticities of demand for gasoline in the US, utilizing recent weekly gasoline consumption and price data and spatially-delineated supply side disruptions due to hurricanes as an instrument for price.

Voluntary schemes to reduce air pollution and some other collectively-created problems seem to be largely dismissed in federal policymaking.  This paper shows that, even in the absence of a national law addressing climate change, more information about climate change is associated with less expenditure on gasoline, the combustion of which emits some greenhouse gases.  This is important: it shows that information can contribute to greater voluntary reductions of possible contributions to global warming, and any voluntary scheme is likely less onerous than a federal mandate.  These reductions could be achieved through the development of local institutions that are largely unperceived or ignored when examining data or considering actions at the national level.

Legislation or regulations addressing climate change or other collective action problems that ignore the evidence provided in this paper - that some people choose to consume less gas when they learn more about climate change – will likely set too strict of standards.  As a result, the economy would suffer more than it would have if voluntary reductions are considered in any policymaking.  

Assuming that some legislation or regulation addressing climate change is inevitable, if legislators want to make their rulemakings addressing climate change as low cost as possible, voluntary reductions in activities that produce greenhouse gases should be considered.  Voluntary actions may not solve the problem entirely, but this paper provides evidence that they go at least part of the way there.