Carbon Pricing, Carbon Dividends and Cooperation: Experimental Evidence

Abstract: We investigated whether carbon taxes with and without carbon dividends improve cooperative behavior to mitigate simulated climate change. We implemented a randomized controlled trial on a large sample of the U.S. general population (N = 2,116). Played in real-time in groups of four, we tested three carbon-pricing treatments and a baseline condition within a modified threshold public goods game of loss avoidance. We found that a carbon tax coupled with carbon dividends reduces carbon-emitting group consumption relative to a baseline condition with no tax, and relative to a carbon tax only. A carbon tax coupled with carbon dividends paid out to below-average polluters (asymmetric dividend) worked best, with 94% of groups remaining below a critical consumption (emission) threshold. We also found that experiencing the asymmetric dividend condition positively affected perceptions of carbon pricing with carbon dividends.

Recommended citation: Bachler, S., Flecke, S.L., Huber, J., Kirchler, M., Schwaiger, R., (2024). Carbon Pricing, Carbon Dividends and Cooperation: Experimental Evidence, Journal of Economic Behavior and Organization, 225, 37-50.
Download Paper