Climate dividends and public support for carbon pricing

With the increasing urgency to address climate change, understanding public sentiment is crucial for designing effective and socially acceptable environmental policies. Despite the existence of effective tools for the green transition, a significant obstacle for policymakers lies in the lack of public support, hindering their ability to utilize these tools effectively. One tool that has been widely advocated as both effective and equitable by economists are “tax & dividend” schemes, i.e., carbon taxes whose revenue is redistributed uniformly to each adult citizen. The lack of popularity of this policy among citizens remains, however, a persistent challenge.

Scholars have identified three pivotal factors influencing public support for tax and dividend schemes: beliefs regarding (i) their environmental effectiveness, (ii) distributional impact (inequality concerns), and (iii) perceived economic implications for individuals' households (self-interest). We study the effect of providing detailed information of the consequences of tax and dividend schemes on the public acceptance and perceived justice of such policies in Germany. Using a representative sample of voting age adults in Germany in an online survey experiment, we assess respondents perceived justice and overall acceptance of four policy proposals which differ in the carbon price and in the share of the resulting income that is redistributed in form of a lump sum climate dividend. We further evaluate how these evaluations vary with different information treatments. We contribute to various strands of literature, enhancing our understanding of the factors influencing support for climate policies among voters and citizens.