The impact of compensatory measures on public support for carbon taxation: an experimental study in Sweden

This study aims at better understanding how, and to what extent, perceptions of a policy instrument's distributional effects impact on policy support, focusing on the case of CO2 taxes on petrol in Sweden. Through a large-scale (N = 5000) randomized survey experiment with a 2 x 3 factorial design, the extent to which perceptions of fairness determine attitudes to a suggested increase of the Swedish CO2 tax is explored. Furthermore, the study considers whether these effects change with the level of the suggested tax increase, as well as whether negative sentiments can be alleviated by combining it with a compensatory measure in the shape of a simultaneous income tax cut financed by the revenues from the tax increase. The results show that a higher tax increase is both viewed as more unfair and enjoys weaker support. Furthermore, compensatory measures can be a powerful policy design tool to increase perceptions of the policy as fair, but the effect of compensation on policy support is conditioned by the individual's left-right ideological position. Whereas people self-identifying to the right react favourably to compensatory measures, people self-identifying to the left become less supportive of a tax increase when combined with a simultaneous cut in income taxes. Key policy insights Perceptions of fairness are highly important for explaining public support for climate policy tools, specifically CO2 taxes. Compensatory measures can be a powerful policy design tool to increase perceptions of the policy as less unfair. However, the effect of compensatory measures on policy support is conditioned by ideological position, and only successful among people to the ideological right. In contexts dominated by right-wing ideals, a combination of a tax and a compensatory scheme may be a successful route forward towards increased climate policy support. In left-oriented contexts the results imply that a CO2 tax without compensation seems more likely to increase support.