The gap between actual carbon prices and those required to achieve ambitious climate change mitigation could be closed by enhancing the public acceptability of carbon pricing through appropriate use of the revenues raised. In this Perspective, we synthesize findings regarding the optimal use of carbon revenues from both traditional economic analyses and studies in behavioural and political science that are focused on public acceptability. We then compare real-world carbon pricing regimes with theoretical insights on distributional fairness, revenue salience, political trust and policy stability. We argue that traditional economic lessons on efficiency and equity are subsidiary to the primary challenge of garnering greater political acceptability and make recommendations for enhancing political support through appropriate revenue uses in different economic and political circumstances.
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We thank S. Carattini, M. Carvalho, I. Dorband, C. Flachsland, M. Jakob, F. Jotzo, L. Osberg, J. Pless, A. Skarbek and C. Touzet for helpful discussions. We further thank M. Roesti, J. Schiele and S. Sulikova for research assistance. We thank participants of a symposium for the High-Level Commission on Carbon Prices at the Ecole Normale Supérieure, seminar audiences in Berlin, Gothenburg and Oxford and attendees of the 23rd annual conference of the European Association of Environmental and Resource Economists for useful comments. L. M. was supported by a postdoctoral fellowship of the German Academic Exchange Service (DAAD). C.H. acknowledges support from the Oxford Martin Programme on the Post-Carbon Transition.
R.R. is employed as a researcher at Climate Leadership Council, a non-governmental organization promoting a proposal for a national US carbon tax with revenues allocated as per-capita lump-sum dividends. This employment commenced five months after he joined as a co-author.
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Klenert, D., Mattauch, L., Combet, E. et al. Making carbon pricing work for citizens. Nature Clim Change 8, 669–677 (2018). https://doi.org/10.1038/s41558-018-0201-2
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