Direct Comparison of Carbon-Dividend vs Earmarked-Spending Designs on Public Support

confidence: high · 2 sources

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Working research — not a recommendation.

This page records what the evidence says a policy does, not what anyone should do about it. It has been synthesized from the cited sources but has not been independently reviewed.

What the evidence says

The sources on this page measure public preference over how carbon tax revenue is used. They do not measure emissions, prices, or household finances. All six claims come from two sources: a review by Carattini (2018) and a paper by Muth (2023).

Focus groups in five European countries (Denmark, France, Germany, Ireland and the United Kingdom) ranked three revenue uses. Earmarking revenue for further emissions reductions was most preferred. Social cushioning for vulnerable groups, such as low-income households and people in remote areas, came second. Revenue-neutral tax reductions came last. The review also reports that when there is a clear trade-off between environmental earmarking and socially progressive redistribution, people tend to prefer earmarking. These findings are associational. The focus-group evidence is qualitative and gives no magnitudes.

A Swiss discrete choice experiment (Carattini et al., 2017) tested what changes that ordering. Giving respondents information about the environmental effectiveness of different carbon tax designs decreases their preference for environmental earmarking. With that information, and information on distributional effects, the most favored uses were lump-sum transfers and social cushioning. The review names the mechanism: the information reduced voters' doubt about the effectiveness of carbon taxes, and that in turn reduced the demand for earmarking. Earmarking, on this account, was demanded mainly to make the tax reduce emissions.

Muth (2023) cites experimental research on a different design, an equal tax rebate to all families. In the US, that scheme increased carbon tax acceptability. A similar scheme in Sweden decreased public support. Muth's text does not state effect sizes for either experiment.

No claim here compares a carbon dividend with earmarking in a single head-to-head design across countries, and none gives numeric effect sizes. The evidence is strongest on direction and thin on magnitude. The evidence base is also narrow: European focus groups, one Swiss experiment, and two experiments cited secondhand.

Where the evidence splits

Earmarking is preferred over redistribution in the focus groups and in the trade-off literature the review cites. In the Swiss experiment, lump-sum transfers and social cushioning were the most favored uses once respondents had information. The sources explain this split. Respondents in the Swiss experiment received information about environmental effectiveness and distributional effects, and the review says that information reduced doubt about effectiveness and so reduced demand for earmarking. The sources do not say whether the focus-group participants had the same information.

Rebates increased acceptability in the US and decreased support in Sweden. The sources on this page do not explain the split. Muth's text gives no design, population, or period difference between the two experiments.

Thresholds and dose-response

No threshold established in the current sources.

Open empirical questions

Findings

Earmarking carbon tax revenue for emissions reductions is preferred to social cushioning and to tax reduction when respondents lack information on effectiveness

confidence — direction: highconfidence — magnitude: high (as stated in the claim; the sources give no numbers, so magnitude is unquantified)consensus: settled for the European focus-group ordering; the ordering is contested once information is provided (see next finding)
mechanism
respondents doubt that a carbon tax reduces emissions, and earmarking addresses that doubt
effect
preference ordering of earmarking, then social cushioning, then tax reduction; no magnitudes reported
conditions / moderators
focus groups in five European countries; earmarking is also preferred when the choice is explicitly against progressive redistribution; the preference decreases with information about effectiveness

Information about effectiveness and distribution decreases preference for earmarking and increases preference for lump-sum transfers and social cushioning

confidence — direction: highconfidence — magnitude: mediumconsensus: thin — one experiment, leaning toward a reversal of the earmarking-first ordering once information is given
mechanism
information reduces doubt about whether the tax cuts emissions, which reduces the demand for earmarking
effect
decreases preference for earmarking; lump-sum transfers and social cushioning become the most favored uses; no magnitudes reported
conditions / moderators
one Swiss discrete choice experiment on energy taxes; replication in other countries and contexts not established

Equal tax rebates increase carbon tax acceptability in the US and decrease public support in Sweden

confidence — direction: highconfidence — magnitude: mediumconsensus: contested — two experiments point in opposite directions
mechanism
not established in the source
effect
direction reverses by country; the source gives no magnitudes
conditions / moderators
a rebate refunding carbon revenue to all families equally in the US; a similar proposed scheme in Sweden; the reason for the difference is not established