Environmental preferences and consumer behavior

- I estimate the effects of environmental preferences on gasoline elasticities.
- I find that environmentalists have lower gasoline retail price and tax elasticities.
- Environmentalists are also less sensitive to the source of the pecuniary signal.
- The policy implications of heterogeneous environmental preferences are discussed.

This paper demonstrates that environment-conscious consumers have lower gasoline retail (tax-exclusive) price and excise tax elasticities, suggesting that they are less sensitive to changes in prices and taxes than their less environmental counterparts. These results on an American state-year dataset are robust to the use of two environmental proxies and to the instrumentation of gasoline retail prices. These findings support the existence of heterogeneous environmental preferences by demonstrating that certain consumers incorporate environmental ideology into their utility functions distinctly from income considerations. The implication that environmental preferences contribute to differential responsiveness to pecuniary signals has repercussions for the forecasting of consumer behavior and for the ease of implementation of environmental policy.