Are fee-and-dividend schemes the savior of environmental taxation? Analyses of how different revenue use alternatives affect public support for Sweden’s air passenger tax

Abstract

This article studies if, how, and why different revenue uses affect public attitudes to environmental taxation. More specifically, using a large-scale (N = 4292) randomized survey experiment with a 2 × 3 factorial design, the article analyses how attitudes towards a proposed increase in the current air passenger tax in Sweden are altered when combining a tax increase with three different suggestions for revenue use. The increasingly popular fee-and-dividend solution, where revenues are distributed back to the public, thus decreasing negative distributive tax effects, is compared with two additional revenue uses: unspecified government spending on welfare services, and re-investment of revenues into aviation biofuels. Our results show that, although some of the commonly used independent variables such as climate concern, personal norms and political-ideological orientation are significant in determining policy attitudes, varying both tax level and revenue use also tangibly affects how a policy proposal is received. Interestingly, however, the fee-and-dividend approach does not yield the most positive policy attitudes. Rather, directing the revenues to fund an increased use of biofuels for aviation is the alternative that most clearly drives positive attitudes to this policy, and is also the alternative that is perceived as the most effective and fair in both the high tax and the low tax alternatives.