Public economics

Finance

Salience (neuroscience)

Business

Work (physics)

Equity (law)

Politics

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Political science

Cognitive psychology

Psychology

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Revenue

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Nature Climate Change

The gap between actual carbon prices and those required to achieve ambitious climate change mitigation could be closed by enhancing the public acceptability of carbon pricing through appropriate use of the revenues raised. In this Perspective, we synthesize findings regarding the optimal use of carbon revenues from both traditional economic analyses and studies in behavioural and political science that are focused on public acceptability. We then compare real-world carbon pricing regimes with theoretical insights on distributional fairness, revenue salience, political trust and policy stability. We argue that traditional economic lessons on efficiency and equity are subsidiary to the primary challenge of garnering greater political acceptability and make recommendations for enhancing political support through appropriate revenue uses in different economic and political circumstances. Ambitious carbon pricing reform is needed to meet climate targets. This Perspective argues that effective revenue recycling schemes should prioritize behavioural considerations that are aimed at achieving greater political acceptance.

Making carbon pricing work for citizens