Majority of Germans in Favor of Financing Climate Protection through Taxes Instead of Debt

Around 66 percent of German households are in favor of raising the top tax rate to finance climate action. This is the finding of an ifo study based on a survey in which German households were asked about their preferences with regard to financing climate change policies. “Having a broad picture of sentiment is important to be able to identify measures that the general public will accept,” says Florian Neumeier, Head of the ifo Research Group Taxation and Fiscal Policy. The majority of respondents are skeptical about shifting costs into the future through debt-financed climate protection.

In second place, with an approval rate of 45 percent, comes a CO₂ sales tax. Significantly less than half of respondents prefer a tax on the winners of climate change (37 percent), and private insurance for any damage caused by climate change (22 percent). The idea of financing climate change policies through public debt receives the least support (14 percent).

Governments can use communication about various aspects of climate change as a tool to influence support for effective climate action. To test the effect of certain information on the attitudes of German households, respondents were divided into groups. “It turns out that considerations of fairness play an important role in people’s approval of a financing measure,” says ifo researcher Sascha Möhrle. The first group was informed that high-income households emit more CO₂. This increased the group’s support for a CO₂ sales tax relative to the uninformed group. A second group learned that elderly people are a major contributor to climate pollution. However, this information did not increase agreement that older people should pay a higher CO₂ tax.

A third group received information about “accidental” winners of climate change. “Contrary to economic theory, this group chose not to tax these inadvertent winners,” Möhrle says.

This study is based on a survey conducted in cooperation with the forsa opinion research institute. Some 15,000 German households were asked about their preferences with regard to financing climate change policies. Participants were randomly divided into four groups, with each receiving different information about which population groups benefit from or contribute to climate change to a particular degree.

This article is part of a series on the topic “The Green Transformation in Business and Politics – Where Are the Opportunities and Risks?” Experts from the ifo Institute evaluate climate action measures and present proposals for reforming climate policy in Germany. All articles in the series can be found in ifo Schnelldienst 5/2022.