Carbon Pricing Acceptability and Revenue Use

Study Notes

People's satisfaction with government-provided information about the policy increases acceptability.
Trust in government also enhances acceptability.

Most people prefer using carbon pricing revenues for environmental projects rather than inequity compensation.
Redistributing revenue to vulnerable groups is the second most preferred revenue use option, increasing acceptability.

Carbon pricing should be implemented as a complementary instrument to other policies that promote less CO2-intensive products and services.
Providing more information about carbon taxation and revenue use can increase public acceptability and trust in government.

Carbon pricing is a systemic policy affecting all carbon-based decisions in the economy.
It discourages high-carbon practices and stimulates cleaner energy production.
Carbon prices do not draw on government budgets but generate revenues for funding public investments in climate innovation and adaptation.

Despite its benefits, carbon pricing faces considerable public and political resistance.
Low public acceptability has led to the cancellation of carbon pricing schemes in some countries.

Perceived unfairness of carbon pricing is significantly correlated with low public acceptability.
Carbon pricing fairness relates to individuals' perceptions of the policy instrument.

Accounting for people's opinions and public acceptability of climate change policies is crucial for political choices.
Lack of acceptability is a reason why most existing carbon pricing schemes are weak, with relatively low price levels.

Climate change and rising economic inequalities are two major challenges for policymakers in the decades to come.
Both challenges endanger democratic institutions and social contracts.

A global progressive carbon tax could raise €150 billion annually for climate adaptation.
Three strategies are proposed to finance climate adaptation:
- Strategy 1: All emitters above the world average emissions contribute to the scheme in proportion to their emissions in excess of this threshold.
- Strategy 2: The top 10% emitters in the world contribute to the scheme in proportion to their emissions in excess of the threshold.
- Strategy 3: The top 1% emitters in the world contribute to the scheme in proportion to their emissions in excess of the threshold.

In Strategy 1, North Americans would contribute 36% of the fund, Europeans 20%, and China 15%.
In Strategy 2, North Americans would contribute 46% of the tax, Europeans 16%, and China 12%.
In Strategy 3, the most favorable to Europeans, the volume of finance coming from Europe would reach €23 billion, more than three times its current contributions.

Possible implementations include country-level carbon and income taxes or a generalized progressive tax on air tickets.
A tax on air tickets has already been implemented in 9 countries and is currently used to finance development programs.
Taxing all business class tickets at a rate of €180 and all economy class tickets at a rate of €20 would yield €150 billion required for climate adaptation every year.