Fairness and the support of redistributive environmental policies

Exemptions from costly policy measures are frequently applied to alleviate financial burdens on specific market participants. Using a stated-choice experiment with around 6000 German household heads, we test how exemptions for low-income households and energy-intensive companies influence the political feasibility of additional cost for the promotion of renewable energies. We find that the policy support is substantially higher when low-income households are exempt rather than the industry. Introducing exemptions for low-income households on top of existing exemptions for the industry increases the acceptability of the policy. We show that the support for exemptions as one example of distributional policy design is associated with individual behavioral measures like inequality aversion and fairness perceptions.

Automated summary

Exemptions from costly policy measures, particularly for low-income households, play a significant role in alleviating financial burdens. In the promotion of renewable energy policies, exempting low-income households leads to substantially higher support compared to exempting the industry. Furthermore, individual measures of inequality aversion and fairness perceptions are associated with support for exemptions.