Energy cost concerns as driver of carbon pricing oppostion
As a result of the energy crisis caused by the Russian invasion of Ukraine, 2023 was characterized by unprecedented price increases for heating fuels, namely gas and oil. On the political spectrum, the unforeseen events of the invasion and its impact on heating costs led to various crisis interventions by governments worldwide, many of which were concerning from a climate policy perspective. Using novel survey data from Germany this study demonstrates that the experience of economic hardship due to energy cost increases is associated with a significant decline in support for carbon pricing, which is widely regarded as the flagship policy for the fight against climate change by economists. The findings also underscore the potential of heightened public awareness about relief measures to mitigate the detrimental effects of distress. Consequently, despite their short-term adverse impact on carbon emissions, relief programs aimed at easing the short-term financial burden of unexpected price spikes may be a second-best option for ensuring climate policy stability. In anticipation of the EU Emissions Trading Scheme II (ETS2) implementation, these findings underscore the necessity of a re-evaluation of the Social Climate Fund. Specifically, there is a compelling rational for the automatic initiation of direct relief measures in response to unparalleled short-term price fluctuations. This would serve to maintain public support, not only for ETS2, but also for the broader European climate policy agenda.