The (indirect) Effects of Windfall Funds on Sustainability Behavior: Insights for Carbon Fee Dividends

Shana M. McDermott and Caroline L. Noblet

Economics of Energy & Environmental Policy, 2023, vol. Volume 12, issue Number 1

Abstract: Motivated by proposed Carbon Dividend legislation in the U.S., we test the impacts of a monetary windfall on sustainability behavior under information conditions about the source of the funds. We find that windfall funds, particularly when presented as a refund, positively impact stated intent to engage in transportation-related sustainable behaviors. Evidence suggests that participants are sensitive to compensation amounts, where a higher compensation amount led to a higher rate of sustainable behavior intention. We also find a small positive spillover effect from individuals who intend to spend the windfall on transportation-related activities and their stated future sustainable behavior, although results are driven by differences across participants' source of environmental motivation. Socio-demographics may partially explain this result. A connection to the environment, either through previous donations or employment, or a belief in human-induced climate change, produced higher declarations for pro-environmental behavior. Our results provide important insights into the indirect behavioral effects of a (carbon fee) dividend, and provide avenues for future research.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2023
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