Non-Monotone Carbon Tax Preferences and Rebate-Earmarking Synergies

Felix Fred Mölk (), Florian Bottner, Gottfried Tappeiner and Janette Walde
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Felix Fred Mölk: Department of Economics, University of Innsbruck, 6020 Innsbruck, Austria
Florian Bottner: Department of Public Finance, University of Innsbruck, 6020 Innsbruck, Austria
Gottfried Tappeiner: Department of Economics, University of Innsbruck, 6020 Innsbruck, Austria
Janette Walde: Department of Statistics, University of Innsbruck, 6020 Innsbruck, Austria

Sustainability, 2025, vol. 17, issue 16, 1-27

Abstract: As carbon taxes gain traction in climate policy, public support remains limited. The purpose of this study was to investigate how different mineral oil tax designs, particularly those combining rebates and earmarking, affect public acceptance, and whether the effects are monotone. The data were based on an online survey that was conducted in 2022 in Austria (n = 1216). It was found that a tax increase of EUR 25-cents per liter is politically feasible if revenues are earmarked for public transport or climate protection and paired with moderate rebates. Other uses of revenue, especially the general budget, fail to achieve majority support, regardless of tax level or compensation. To capture non-monotonic and heterogeneous preferences, an adaptive-choice-based-conjoint experiment with hierarchical Bayesian estimation was employed. Rebates were modeled as a stand-alone attribute, allowing for the identification of non-monotonicities for this attribute. The findings show deviations from widespread monotonicity assumptions: a moderate tax increase (EUR 10-cent/liter) was preferred over no increase, even in the absence of earmarking. Similarly, larger annual rebates (EUR 200–300) reduced support compared to a EUR 100 rebate, which was most popular.

Keywords: carbon tax; public support; revenue recycling; adaptive choice based conjoint; hierarchical Bayesian estimation; environmental sustainability; social sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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