Does Paying to Pollute Make Pollution Seem Less Bad?

A common critique of market-based instruments is that they commodify pollution and so reduce its moral stigma. If true, the increasing use of market-based instruments could reduce concern for the environment. This project proposes theory and finds evidence largely against the anti-commodification critique. The project reports evidence from a preregistered experimental vignette study of 2,040 Americans, with an AmeriSpeak sample designed to be demographically representative on age, race/ethnicity, education, and gender. Participants randomly assigned to learn about two types of market-based regulations of a fictitious new pollutant, malzene, did not find malzene to be less morally problematic than those randomly assigned to learn about a mandate dictating pollution limits. The results were sufficiently precise to rule out any decrease in moral stigma from a pollution tax (as compared to a mandate), and to rule out a decrease larger than 4% from a cap-and-trade program. Market-based regulations can also make pollution look worse: Companies polluting in compliance with market-based instruments (and thus paying to pollute) looked morally worse than companies polluting in compliance with a mandate. This difference was statistically significant and economically meaningful. This finding suggests a new argument against market-based regulations—that they reduce reputational benefits of legal compliance.