The impact of trial runs on the acceptability of environmental taxes: Experimental evidence

• The paper examines the political difficulty of enacting environmental taxes.
• We observe significant tax aversion – i.e., opposition to taxes that are materially beneficial.
• A trial period of an environmental tax significantly mitigates tax aversion.
• Effects from a trial period are robust across alternative tax schemes.

This paper examines the political difficulty of enacting welfare-enhancing environmental taxes. Using referenda in a market experiment with externalities, we investigate the effect of trial periods on the acceptability of two theoretically equivalent Pigouvian tax schemes. While implementing either tax is in subjects’ material self-interest, we find significant levels of opposition to both schemes, though the level differs considerably. Results show that trial runs can overcome initial tax aversion, which is robust across schemes, but a trial with one scheme does not affect the acceptability of the other. Trial periods also mitigate initial biases in preferences of alternative tax schemes.