Economic Prescriptions and Public Responses to Climate Policy

Abstract

Public acceptability is one of the main barriers to the implementation of carbon taxes. Qualitative evidence based on a sample of individuals interviewed in Geneva, Switzerland, shows that the general public would not tackle climate change as economists suggest. The gap concerns not only the choice of climate policy's instruments (i.e. pull versus push measures), but also its specific design in the case of carbon taxes. In this respect, the gap is driven by a diffused perception of environmental ineffectiveness of carbon taxes, which goes hand in hand with distrust in the government and a strong demand for earmarking carbon tax revenues for environmental purposes. Our empirical findings are consistent with the recent literature on the public's preferences on environmental policy design and provide new evidence for the need to reconsider the conventional approach to economic instruments and environmental tax reforms. Reducing resistance to the implementation of Pigouvian taxes cannot abstract from providing effective responses to the concerns emphasized by the general public. Policy relevancePolicy design is key to improve acceptability of climate policy in general and of economic instruments in particular. Given the current understanding and perception of carbon taxes by the general public, there is a substantial trade-off between efficiency-and acceptability-enhancing use of revenues from carbon taxes. Earmarking revenues for environmental purposes clearly reduces perceived complexity and increases acceptability. The paper addresses this trade-off and, drawing on the Swiss experience, discusses how making financial and environmental benefits salient may improve the acceptability of carbon taxes. It also considers the implementation of climate policies directed towards voluntary efforts, which enjoy larger support by the general public.

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

“…Higher energy prices and less purchasing power 13 Beuermann and Santarius, 2006;Carattini et al, 2017;Dresner et al, 2006b;Harwatt et al, 2011;Kallbekken and Saelen, 2011;Kaplowitz and McCright, 2015;Klok et al, 2006;Lo, 2013;Lo et al, 2013 α ;O'Connor et al, 2002;Owen et al, 2008 α ) Loss of jobs 5 Carattini et al 2017;O'Connor et al 2002) Less comfort and wellbeing 4 Baron and Jurney, 1993;Beuermann and Santarius, 2006;Harwatt et al, 2011) Limits freedom of choice 4 (Baron and Jurney, 1993;Harwatt et al, 2011 α ;O'Connor et al, 2002;Owen et al, 2008 β ) Voluntary behaviour punished rather than appreciated 3 (Baranzini et al, 2014;Kallbekken and Aasen, 2010;Klok et al, 2006)…”

“…Impacts on poor households (fuel poverty) 14 (Baranzini et al, 2014;Dresner et al, 2006a;Dresner et al, 2006b;Harwatt et al, 2011;Kallbekken and Aasen, 2010;Kallbekken and Saelen, 2011;Kaplowitz and McCright, 2015;Klok et al, 2006;Lo, 2013;Lo et al, 2013 α ;Owen et al, 2008 β ) Policy burden unevenly distributed between firms and households or among the latter 11 (Baron and Jurney, 1993;Beuermann and Santarius, 2006;Brannlund and Persson, 2012;Carattini et al, 2017;Deroubaix and Leveque, 2006;Dresner et al, 2006a;Harwatt et al, 2011 β ;Klok et al, 2006;Lo, 2013;Owen et al, 2008 β ) Policy burden unevenly distributed among provinces, states or countries 5 (Brannlund and Persson, 2012;Carson et al, 2010;Klok et al, 2006;Lachapelle et al, 2012;Lo, 2013) Impacts on rural households 4 Harwatt et al, 2011;Kallbekken and Aasen, 2010;Owen et al, 2008 α ) Impacts on the elderly and people in need of care 4 Dresner et al, 2006b;Kallbekken and Aasen, 2010;Owen et al, 2008 β ) Exemptions and privileges given to some sectors 4 (Carson et al, 2010;Deroubaix and Leveque, 2006;Dresner et al, 2006b) Initial distribution of permits 2…”

“…Distrust in government 12 (Baranzini et al, 2014;Beuermann and Santarius, 2006;Deroubaix and Leveque, 2006;Dresner et al, 2006a;Dresner et al, 2006b;Hammar and Jagers, 2006;Hsu et al, 2008;Klok et al, 2006;Lo, 2013;Lo et al, 2013 α ;Owen et al, 2008 α ) Distrust in good use of revenues of carbon pricing 9 (Baranzini et al, 2014;Beuermann and Santarius, 2006;Dresner et al, 2006a;Dresner et al, 2006b;Hsu et al, 2008;Kallbekken and Aasen, 2010;Kaplowitz and McCright, 2015) Dissatisfaction with governmental information provision about the policy 7 (Baranzini et al, 2014;Beuermann and Santarius, 2006;Deroubaix and Leveque, 2006;Dresner et al, 2006a;Kallbekken and Aasen, 2010;Klok et al, 2006;Lo, 2013) Insufficient consultation of social partners 3 Deroubaix and Leveque, 2006;Klok et al, 2006) Distrust in markets 2 (Lo et al, 2013 α ;Owen et al, 2008 α ) Notes: Most studies deal only with carbon taxes, except for the ones indicated by: α Deals with cap-and-trade scheme.…”

Green Consumers and Climate Policy: Reconciling Ostrom and Nyborg, Howarth and Brekke

“…e.g. Dresner et al 2006;Baranzini et al 2014). The pressure of people disliking environmental taxes may be so strong to push politicians to abandon their proposed reforms (see e.g.…”

The Emissions Gap Report 2014

“…To secure popular support for carbon pricing, the public needs to be informed about its positive effect on emissions reduction targets, as well as the co-benefits of cleaner air, health and fiscal sustainability (Hsu et al, 2008;Bristow et al, 2010;Kallbekken et al, 2011;Baranzini et al, 2014;Baranzini and Carattini, 2017). Timing is also important: a gradual reform is more likely to be successful than sudden and drastic price increases.…”