As climate change urgency intensifies, carbon taxation is widely seen as essential for reducing emissions by making carbon use more costly. However, public support is critical for successful implementation, and research highlights that support often depends on perceptions of fairness, particularly regarding disproportionate impacts on specific groups. Policymakers address such concerns by redistributing tax revenues to mitigate inequities. For example, rural residents, who face higher fuel costs due to greater car dependency and limited public transport, can receive targeted compensation to balance these effects.
This study examines the effectiveness of regional revenue recycling in addressing equity concerns, using Austria as a case study. Austria is uniquely positioned for this research, as it is the only country with a yearly lump-sum payment system that adjusts payouts based on rurality and public infrastructure access.
Drawing on AUTNES data, the study analyzes how regional differences in support for carbon taxes evolved throughout the implementation process, including the tax itself and associated compensation mechanisms. A survey experiment further explores the relationship between citizens’ awareness of regional revenue recycling and their support for the tax.
The findings have broader implications for policymakers in other countries facing similar equity challenges. If Austria’s regional compensation system is shown to increase support for carbon taxation, it could serve as a model for balancing regional inequalities in climate policies. Conversely, a null result would highlight the need to explore alternative strategies for building public acceptance of emissions-reduction measures.