Tax the Rich, Compensate the Poor? The Role of Perceived Fairness and Effectiveness for Public Support of Carbon Pricing Policies

Carbon pricing is regarded as among the most effective instruments to reduce CO2 emissions and mitigate climate change. Yet it encounters considerable public opposition and policymakers as well as social science researchers disagree about which policy designs are both effective and publicly accepted. Respective debates are often dominated by a narrow lens of economic theory that highlights effectiveness while neglecting distributive conflicts and questions of justice entailed by higher carbon prices and their initially regressive nature (i.e., the fact that carbon prices tend to punish the poor and favor the rich, thereby exacerbating social inequality).
This paper argues that public support for carbon pricing policies depends on both factors – perceived effectiveness and fairness assessments – which often trade-off against each other: higher CO2 prices are more effective but are perceived as unfair, and vice-versa. Moreover, individuals differ in the pressures, resources, and behavioral opportunities when reacting to higher carbon prices, which in turn shapes perceived effectiveness and fairness.
We present findings from survey experiments implemented in the German Longitudinal Environmental Study (GLEN), a large-scale panel study of a random sample of the adult German population. Respondents were exposed to vignettes containing various carbon tax scenarios applied to different example households with varying behavioral resources and opportunities to face these scenarios. Using a multifactorial design and causal mediation analyses, we assess how redistributional features – such as higher price ranges for high-income groups or compensations for lower-income households – affect support. Our findings shed light on the trade-offs between efficiency and fairness and identify conditions under which carbon pricing policies are more likely to gain democratic legitimacy.
The GLEN survey wave in which the experiment is implemented is currently still in the field, with an expected sample size of about N = 8,000 respondents. Preliminary analyses show that fairness has a stronger impact on policy support than perceived effectiveness does. Moreover, people seem to be most concerned about the regressive nature of carbon pricing. These concerns can be mitigated by compensation policies such as revenue recycling (payoff of public revenues to citizens) and by promoting low-cost behavioral opportunities, for example through subsidies directed at households with relatively higher costs to reduce emissions.
Our study thus shows that inequalities in the burdens and adaptive opportunities of carbon pricing are central to citizens’ support for climate policies – directly linking climate change mitigation to the conference’s focus on the political causes and consequences of inequality.