2024/11 | LEM Working Paper Series | ||||||||||||||||
Opinion Dynamics meet Agent-based Climate Economics: An Integrated Analysis of Carbon Taxation |
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Teresa Lackner, Luca E. Fierro and Patrick Mellacher |
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Keywords | |||||||||||||||||
Climate change, mitigation policy, opinion dynamics, agent-based models, transition risks
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JEL Classifications | |||||||||||||||||
C63; H31; Q43; Q50
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Abstract | |||||||||||||||||
The paper introduces an integrated approach, blending Opinion Dynamics
with a Macroeconomic Agent-Based Model (OD-MABM). It aims to explore
the co-evolution of climate change mitigation policy and public
support. The OD-MABM links a novel opinion dynamics model that is
calibrated for European countries using panel survey data to the
Dystopian Schumpeter meeting Keynes model (DSK). Opinion dynamics
regarding stringent climate policy arise from complex interactions
among social, political, economic and climate systems where a
household's opinion is affected by individual economic conditions,
perception of climate change, industry-led (mis-)information and
social influence. We examine 133 policy pathways in the EU,
integrating various carbon tax schemes and revenue recycling
mechanisms. Our findings reveal that while effective carbon tax
policies initially lead to a decline in public support due to
substantial macroeconomic transition costs, they concurrently drive a
positive social tipping point in the future. This shift stems from the
evolving economic and political influence associated with the fossil
fuel-based industry, gradually diminishing as the transition
unfolds. Second, hybrid revenue recycling strategies that combine
green subsidies with climate dividends successfully address this
intertemporal tradeoff, broadening public support right from the
introduction of the carbon tax.
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