How to make carbon taxes more acceptable
This report explores practical ways through which carbon taxes can be made more politically attractive. It reviews the empirical evidence on people’s attitudes towards environmental taxes and draws lessons from these findings on publicly acceptable forms of carbon taxation (with an overview of the empirical studies reviewed provided in the appendices). The report discusses strategies that can enable a transparent and open debate on the implications of implementing a carbon tax. Its premise is that carbon taxes can be made acceptable by designing them in a way that responds to voter concerns.
The report was produced as part of the Statkraft research programme, ‘“Fit-for-purpose” energy and climate change mitigation policies for the European Union’, completed in December 2017. A final project report summarises all of the main findings and recommendations.
- Taxing carbon is one of the best ways to incentivise the reduction of greenhouse gas emissions. By putting a price on carbon, emitters are confronted with the environmental cost of their actions and forced to manage their carbon output. While other policy interventions are also required, putting a price on carbon is central to reducing emissions cost-effectively.
- The low penetration of carbon taxation is in large part due to people’s aversion to taxes generally, and to carbon taxes more specifically. Making carbon taxes more politically acceptable is thus a key precondition for more stringent and effective climate action.
- Phasing in carbon taxes over time allows people to become familiar with the tax and can overcome initial resistance.
- Earmarking tax revenues to finance mitigation projects enhances acceptability by signalling a public commitment to reducing emissions.
- Alternatively, and preferably, tax proceeds may be used to address the regressive effects of carbon taxes or to achieve revenue neutrality.
- For all design options, information-sharing and clear communication are essential, both before and after the introduction of carbon taxes, in order to foster acceptance.
The other Statkraft policy and research outputs that accompany this report are:
- The credibility of the European Union’s efforts to decarbonise the power sector (Bassi S, Averchenkova A and Carvalho M, 2017)
- Energy policy and the power sector in the long run (Doda B and Fankhauser S, 2017)
- Decarbonising the European Union credibly, effectively and acceptably (Bassi S, Carvalho M, Doda B and Fankhauser S, 2017)