Carbon Pricing Acceptability and Revenue Use

Factors Influencing Carbon Pricing Acceptability

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

Revenue Use Preferences

• 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.

Policy Insights

• 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.

Characteristics of Carbon Pricing

• 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.

Challenges to Carbon Pricing

• 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.

Fairness and Public Acceptability

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

Importance of Public Acceptability

• 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 Economic Inequality

• 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.

Financing Climate Adaptation

• 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.

Distribution of Contributions

• 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.

Implementing a Progressive Carbon Tax

• 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.