Birds of a Feather Pollute Together: Endogenous Green Preferences and Opinion Dynamics in the Low-Carbon Transition

Demis Legrenzi, Emanuele Ciola, Davide Bazzana, Massimiliano C. P. Rizzati, Enrico M. Turco and Sergio Vergalli

August 2025

This work analyzes the effects and feedback of endogenously evolving consumer green preferences and social influence on firms’ investment decisions to reduce CO₂ emissions. While the existing literature mostly treats the issues of pro-environmental purchase decisions and decarbonization separately, we adopt a cohesive framework to bridge the gap between consumption and production. Using the Multi-Agent model for Transition Risks (MATRIX), a stock-flow-consistent, agent-based, integrated assessment model, we endogenize green preferences for consumption goods and extend them with an opinion dynamics module. We find that endogenous green preferences can accelerate the green transition by complementing carbon taxation. However, imitation among households produces non-trivial effects: without large-scale, coordinated abatement efforts by firms, sporadic investments fail to generate sufficient momentum to shift preferences toward greener products. Consequently, while individual-level actions may favor full CO₂ emissions reduction, anti-environmental social norms dominate, hindering the green transition.

Keywords: Agent-based model; Green preferences; Opinion dynamics; Carbon abatement; Carbon tax

JEL Classification: C63; D9; Q5; Q58