Magali Delmas, Stephen Locke and I have just released a new NBER Working Paper. Stephen is on the rookie job market this year. I always try to write "original" papers on subjects where I hope that a new literature will emerge. Let me sketch this paper's big ideas.
As usual, we are thinking about the economics of climate change.
Point #1: A cliche in the environmental policy community is the following statement; "If the United States and the world adopted a carbon tax, then the demand for energy efficient products such as solar panels and electric vehicles would increase." The logic supporting this statement is simply a comparison of the present discounted value of the operating costs of conventional fossil fueled products versus their "green" substitutes.
Point #2: As Matt Holian and I demonstrate, suburban households today have a larger carbon footprint than center city households and they know this and the former group are more likely to oppose carbon pricing. Given the suburbanization of U.S voters, median voter politics hurts the prospects of a majority U.S coalition supporting low carbon policies.
The starting point of my new paper with Delmas and Locke is the synergistic possibilities offered by jointly owning solar panels and an electric vehicle. Suppose that in the near future that suburban households can supersize their panels to generate enough power for their house and power their EV. New battery storage would hold the power until night when the car would recharge. Such a suburban household's carbon emissions would decline to zero. Based on Point #2, such suburbanites would no longer oppose carbon pricing.
Note that this logic flips point #1 above. The adoption of green products in the suburbs would increase suburban support for carbon pricing.
Why would the adoption of the EV and solar panels accelerate in the suburbs? That's the point of our new paper. The product quality is improving (think of Tesla) and the quality adjusted price is falling (and new financing options such as leasing are becoming available). We study a number of supply and demand side trends that strongly suggest that "accidental environmentalists" (those who seek to own a EV and solar due to cost minimization and product quality rather than because they want to please Al Gore) are a growing share of the buyers of these products and that this part of the potential customer base is ripe for growth.
Such accidental environmentalists provide public goods by accident. They bought the product because of the private benefits the product offered.
Industrial organization economists often study quality improvements for new goods but they rarely link the quality improvements to mitigating Pigouvian externality challenges or to affecting voting outcomes (i.e support for carbon taxes) our paper represents a "missing link".