Perceived fairness and public acceptability of carbon pricing: a review of the literature

TY - JOUR

T1 - Perceived fairness and public acceptability of carbon pricing

T2 - a review of the literature

AU - Maestre-Andrés, Sara

AU - Drews, Stefan

AU - van den Bergh, Jeroen

PY - 2019/9

Y1 - 2019/9

N2 - While carbon pricing is widely seen as a crucial element of climate policy and has been implemented in many countries, it also has met with strong resistance. We provide a comprehensive overview of public perceptions of the fairness of carbon pricing and how these affect policy acceptability. To this end, we review evidence from empirical studies on how individuals judge personal, distributional and procedural aspects of carbon taxes and cap-and-trade. In addition, we examine preferences for particular redistributive and other uses of revenues generated by carbon pricing and their role in instrument acceptability. Our results indicate a high concern over distributional effects, particularly in relation to policy impacts on poor people, in turn reducing policy acceptability. In addition, people show little trust in the capacities of governments to put the revenues of carbon pricing to good use. Somewhat surprisingly, most studies do not indicate clear public preferences for using revenues to ensure fairer policy outcomes, notably by reducing its regressive effects. Instead, many people prefer using revenues for ‘environmental projects’ of various kinds. We end by providing recommendations for improving public acceptability of carbon pricing. One suggestion to increase policy acceptability is combining the redistribution of revenue to vulnerable groups with the funding for environmental projects, such as on renewable energy. Key policy insights If people perceive carbon pricing instruments as fair, this increases policy acceptability and support. People’s satisfaction with information provided by the government about the policy instrument increases acceptability. While people express high concern over uneven distribution of the policy burden, they often prefer using carbon pricing revenues for environmental projects instead of compensation for inequitable outcomes. Recent studies find that people’s preferences shift to using revenues for making policy fairer if they better understand the functioning of carbon pricing, notably that relatively high prices of CO2-intensive goods and services reduce their consumption. Combining the redistribution of revenue to support both vulnerable groups and environmental projects, such as on renewable energy, seems to most increase policy acceptability.

AB - While carbon pricing is widely seen as a crucial element of climate policy and has been implemented in many countries, it also has met with strong resistance. We provide a comprehensive overview of public perceptions of the fairness of carbon pricing and how these affect policy acceptability. To this end, we review evidence from empirical studies on how individuals judge personal, distributional and procedural aspects of carbon taxes and cap-and-trade. In addition, we examine preferences for particular redistributive and other uses of revenues generated by carbon pricing and their role in instrument acceptability. Our results indicate a high concern over distributional effects, particularly in relation to policy impacts on poor people, in turn reducing policy acceptability. In addition, people show little trust in the capacities of governments to put the revenues of carbon pricing to good use. Somewhat surprisingly, most studies do not indicate clear public preferences for using revenues to ensure fairer policy outcomes, notably by reducing its regressive effects. Instead, many people prefer using revenues for ‘environmental projects’ of various kinds. We end by providing recommendations for improving public acceptability of carbon pricing. One suggestion to increase policy acceptability is combining the redistribution of revenue to vulnerable groups with the funding for environmental projects, such as on renewable energy. Key policy insights If people perceive carbon pricing instruments as fair, this increases policy acceptability and support. People’s satisfaction with information provided by the government about the policy instrument increases acceptability. While people express high concern over uneven distribution of the policy burden, they often prefer using carbon pricing revenues for environmental projects instead of compensation for inequitable outcomes. Recent studies find that people’s preferences shift to using revenues for making policy fairer if they better understand the functioning of carbon pricing, notably that relatively high prices of CO2-intensive goods and services reduce their consumption. Combining the redistribution of revenue to support both vulnerable groups and environmental projects, such as on renewable energy, seems to most increase policy acceptability.

KW - cap-and-trade

KW - Carbon tax

KW - climate policy

KW - equity

KW - policy support

KW - public perception

UR - http://www.scopus.com/inward/record.url?scp=85068715612&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85068715612&partnerID=8YFLogxK

U2 - 10.1080/14693062.2019.1639490

DO - 10.1080/14693062.2019.1639490

M3 - Article

VL - 19

SP - 1186

EP - 1204

JO - Climate Policy

JF - Climate Policy

SN - 1469-3062

IS - 9

ER -