Econonomics of Energy and Environmental Policy

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The (indirect) Effects of Windfall Funds on Sustainability Behavior: Insights for Carbon Fee Dividends

Abstract:
Motivated by proposed Carbon Dividend legislation in the U.S., we test the impacts of a monetary windfall on sustainability behavior under information conditions about the source of the funds. We find that windfall funds, particularly when presented as a refund, positively impact stated intent to engage in transportation-related sustainable behaviors. Evidence suggests that participants are sensitive to compensation amounts, where a higher compensation amount led to a higher rate of sustainable behavior intention. We also find a small positive spillover effect from individuals who intend to spend the windfall on transportation-related activities and their stated future sustainable behavior, although results are driven by differences across participants' source of environmental motivation. Socio-demographics may partially explain this result. A connection to the environment, either through previous donations or employment, or a belief in human-induced climate change, produced higher declarations for pro-environmental behavior. Our results provide important insights into the indirect behavioral effects of a (carbon fee) dividend, and provide avenues for future research.
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Keywords: Windfall effects, Behavioral spillover, Carbon Dividend Act

DOI: 10.5547/2160-5890.12.1.smcd


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Published in Volume 12, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


 

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