Supporting carbon taxes: The role of fairness

Abstract

While the economic case for carbon pricing is compelling, public support for it remains low. Using a stated-choice experiment with a sample of 6000 German household heads, we examine how their fairness preferences influence support for carbon taxes under different revenue uses. We find that respondents who prefer green spending are more likely to support a carbon tax, but the support diminishes considerably for higher tax rates – in contrast to respondents who support social cushioning. When restricted to options for direct revenue redistribution, Germans prefer lump-sum payments over directing payments to the poorest or the most affected. Preferences over these options depend both on genuinely different concepts of fairness and economic circumstances. Our findings have implications for advancing carbon pricing, as its support can be increased substantially when designed according to citizens' fairness preferences.