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Avoiding unmanageable climate change implies that global greenhouse gas emissions must be
reduced rapidly. A significant body of literature shows that policy instruments such as carbon
prices can make an important contribution to this goal. In contrast, changes in preferences or
values are rarely considered, even though other major socioeconomic transitions - such as those
from reducing smoking and drink-driving - have succeeded partly because values have changed.
This article examines the impact of climate policy-induced changes in consumers' values. We
demonstrate that when changes in values through policies occur, and are not accounted for, such
policies are inefficient. First, target-achieving carbon taxes must be adjusted if they crowd-in or
-out social preferences. Second, when the urban built environment changes mobility
preferences, low-carbon infrastructure investments are more valuable. Third, policy-induced
changes in preferences for active travel and low-meat diets could increase the net benefits of the
transition to zero emissions, in turn affecting optimal policy.
