Eat Your Greens

CESifo Fellow Italo Colantone and his colleagues Livio Di Lonardo, Yotam Margalit and Marco Percoco delved into the question of how to make politicians advance green policies while avoiding political suicide. The researchers start by highlighting a couple of examples of backlash to green policies that quickly turned into a much larger revolt. One was the introduction of a carbon tax hike by President Emmanuel Macron in France in 2018, aimed at incentivizing environment-friendly behavioural changes amongst motorists. Widespread protests quickly erupted that mutated into the “yellow vest” movement that swept the country. The French government dropped the proposed policy.

The following year in Chile, a modest subway fare hike associated with a government decision to power the network with renewable energy triggered mass protests that spread to the whole country.

The fundamental issue here is that environmental protection policies typically offer distant rewards but entail immediate costs, which are often high and unevenly distributed.

Such was the case that provides the substance for this particular study. The so-called Area B policy advanced in 2018 in Milan restricted certain polluting vehicle models from circulating within around 70% of the city’s area, where 97% of the city population resides. The policy entailed significant economic losses for owners of the banned car models, who reported a median cost of €3,750, corresponding to about 17% of residents’ median annual gross income.

The ensuing backlash resulted in a significant increase in support for the party opposed to such measure, the populist right party Lega, in the following elections. Specifically, owners of banned cars were 13.5 percentage points more likely to vote for Lega in the European Parliament elections of 2019.

Interestingly, the researchers found no attitudinal or behavioural differences between car owners affected by the ban and owners who were not. If anything, affected car owners exhibited slightly more environment-friendly behaviour. In other words, the adverse pecuniary impact of the Area B policy did not shift those car owners to Lega by leading them to adopt the party’s relatively sceptical view on green issues. Instead, their results suggest that the shift to Lega reflects disaffection with the perceived unfairness of the policy and with its pocketbook implications.

With such a substantial impact on the voting behaviour of those affected by a well-meaning green policy, it becomes clear that, if environmental policies are to be politically viable, policymakers should aim to reduce the concentration of the costs and spread them out across larger segments of the public, as well as dedicate sufficient funds to compensation schemes targeted at the losers from the policy.

The researchers point to some areas where it would be wise to pay heed to their conclusions. The workers employed by companies that extract, refine, distribute and produce electricity from fossil fuels in the U.S. alone number some 2.8 million, a figure comparable on a per capita basis to the situation in Australia and the UK. If the livelihoods of these workers and their families comes under threat due to a transition to cleaner energy sources, the political blow-back could be substantial without sufficient policies in place to cushion the blow.

In sum, greens can be made far tastier if prepared and served correctly.