Overcoming public resistance to carbon taxes

Abstract

Carbon taxes represent a cost-effective way to steer the economy toward a greener future. In the real world, their application has however been limited. In this paper, we address one of the main obstacles to carbon taxes: public opposition. We identify drivers of and barriers to public support, and, under the form of stylized facts, provide general lessons on the acceptability of carbon taxes. We derive our lessons from a growing literature, as well as from a combination of policy "failures" and "successes." Based on our stylized facts, we formulate a set of suggestions concerning the design of carbon taxes. We consider the use of trial periods, tax escalators, environmental earmarking, lump-sum transfers, tax rebates, and advanced communication strategies, among others. This paper contributes to the policy debate about carbon taxes, hopefully leading to more success stories and fewer policy failures. This article is categorized under: Climate Economics > Economics of Mitigation.

Keywords: acceptability; carbon pricing; carbon taxes; public support; revenue recycling.

Figure 1

Predicted percentage of votes in favor of a carbon tax, by carbon tax rates. Note. Filled circles indicate observation in the sample; empty circles indicate observations obtained through extrapolation. In this scenario, the choice experiment assumed that revenues would be used to reduce the value‐added tax, as in the referendum case. (Reprinted with permission from Carattini et al. (2017). © The Author(s) 2017 Open Access. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/))