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Carbon taxes can be a cost-effective way to address climate change. However, for successful implementation of carbon taxes, they must be accepted by the public. Low levels of public support contributed to violent protests in France against fuel tax rises to reduce emissions in 2018. Closer to home, Australia’s Clean Energy Act 2011 was successfully repealed by the Abbott Government in 2014 following extensive political campaigning.

In our study, ‘Public acceptance of carbon taxes in Australia’ (recently published in Energy Economics), we investigate different policy features that may influence public support for such a scheme. Our work can be used by policymakers who wish to better understand public opinions about carbon taxes.

Using a discrete choice framework, we surveyed a representative sample of over 400 Australians. The survey was conducted online in May 2020. We sought opinions on five important attributes of a carbon tax policy:

  • Increases in household electricity bills: Carbon taxes may result in increases in electricity bills if energy retailers affected by the tax pass some of the costs on to consumers.
  • Financial support for low-income households: Without subsidies for low-income households to help them cover any increases in bills, these households may end up paying the most as a percentage of their incomes for the policy.
  • Revenue recycling options: Revenues from the policy can be spent in various ways, such as by being allocated to the general tax budget or to support other environmental policies.
  • Information sharing and communication: People may want to know more about the policy. Information could, for example, be provided about the policy’s effectiveness in reducing greenhouse gas emissions.
  • Program management: Policies such as this require strict oversight. Typically, management of such policies would fall to a government agency. However, we also investigated support for alternative policy managers.

Each of these five attributes was the most important attribute for at least some of the survey respondents. This finding suggests that our broad consideration of several design details is warranted. There is potential for more popular carbon pricing schemes if the design of these details is appropriate.

Investigating optimal policy design

As expected, we find that Australians dislike increases in electricity costs. However, our results suggest that the value placed on other attributes of a carbon pricing scheme can leave consumers positively inclined to such policy changes. Providing financial support for low-income households was deemed to be a particularly important factor in public acceptance. Respondents also indicated a preference to spend revenues raised from the scheme on grants for low-carbon technologies and policies targeting energy efficiency. The Federal Government was the favoured manager of a carbon pricing scheme.

We found little support for alternative revenue recycling options, such as adding to the general tax base or the creation of policies targeting behavioural change. Alternative scheme managers, such as the Reserve Bank of Australia or a not-for-profit organisation, also garnered little backing. We considered the Reserve Bank of Australia because their preferences for price stability align well with investor preferences for policy predictability.

What’s in a name?

Existing research has examined whether using other terms to describe the policy increases public support for a carbon tax. In Australia, this concern is particularly relevant as much effort was placed on ensuring that the carbon price package introduced in 2011 was not labelled as a carbon tax. Researchers have suggested that the ‘axe the tax’ campaign was crucial in the 2013 federal election outcome and the eventual withdrawal of the Clean Energy Act 2011.

In our research, we also investigated the substitutability of the terms ‘carbon tax’ and ‘carbon pricing scheme’. We find little evidence that these terms influence how respondents value the different attributes of a carbon pricing scheme. This suggests that public acceptance of carbon taxes in Australia are not driven by issues related to nomenclature and that the significance of such factors may have been relatively minor in prior policy debates.

Our findings could guide future carbon pricing scheme policy design

Compared to subsidies that incentivise environmentally friendly behaviour, the implementation of carbon taxes are frequently viewed as less publicly acceptable. This may be because of views that the personal costs are too high or that carbon taxes may damage the broader economy through effects on competitiveness and unemployment. A lack of trust in governments and their processes can be another potential obstacle to carbon pricing.

The results of our study could guide suitable approaches to enhance public acceptability of carbon pricing in Australia. The public’s disdain for higher electricity bills could be countered by starting with a low carbon price that gradually increases over time while highlighting the attributes of the policy that gained the most support. Even a modest carbon price may help accelerate the adoption of clean technology and lower emissions. Further increases over time, taking into account local circumstances, could help reach the higher levels of carbon prices that are considered necessary to adequately mitigate climate change.

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