Will people equate a carbon cashback with higher energy prices?

Imagine a carbon fee has been enacted, and I'm happily receiving my monthly dividend check.  It seems like I would soon not notice the extra income, but I might constantly notice increasing prices.  This seems like a behavioral-economics challenge with any carbon fee and dividend plan-- how to make sure people continually make the connection between their increasing energy prices and their monthly dividend.   I'm wondering if anyone has research or examples from other countries on this topic

3 Replies

@Alex Messinger
I think Canada is struggling with a very similar problem.   As I understand it, the deposits in peoples' checking accounts aren't clearly labeled as coming from the carbon fee so they don't recognize that they are being compensated for increased energy costs.  The Conservative party in Canada is running with this with a promise to repeal the carbon tax.  

T Todd Elvins
2721 Posts

Let's check in with @Dana Nuccitelli to see what he knows about other countries.

Hi @Alex Messinger. As @Daniel O’Brien noted, this has been a challenge in Canada, as I touched on in my recent Yale article about the country:

But the carbon price rebates are opaque, usually coming in the form of quarterly direct bank deposits that don’t specify their source. According to a recent survey, 37% of Canadians don’t think or aren’t sure if they have received a carbon tax rebate, and only 14% think the refund exceeds their carbon costs.

The Canadian government has tried to fix that in the wake of lobbying by CCL, as we discussed a few months ago:

According to this news release from the federal government, the dividend will now be labeled “Canada Carbon Rebate.” This name change will help “clarify its function, and make its meaning and relationship to the carbon pricing system more intuitive for Canadians.” 

Basically, making sure people are well informed about the carbon cashback they're receiving, and the fact that it exceeds their increased costs, is a difficult challenge. But it's a critical one, as a study that I wrote about a couple of years ago found:

dividends must be coupled with educational efforts to inform citizens about how much the carbon price is increasing their costs and that the carbon fee and dividend system is generating a net income for most households. We can show people the size of their dividends on checks, but individuals’ carbon fee costs are much tougher to add up, and this study indicates people may tend to overestimate them.

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