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Public Choice

, Volume 175, Issue 1–2, pp 37–62 | Cite as

The unpopularity of incentive-based instruments: what improves the cost–benefit ratio?

  • Isabelle Stadelmann-Steffen
  • Clau Dermont
Article

Abstract

Whereas ecological economists argue strongly in favor of incentive-based approaches to promote renewable energy sources and reduce energy consumption, those instruments have been shown to be particularly difficult to implement politically. We begin with a recognition that cost perceptions that inherently characterize incentive-based policy instruments are a fundamental reason for their unpopularity. We therefore argue that the crucial question that policymakers need to address is how the benefit–cost ratios of incentive-based instruments can be altered in ways such that their inherent costs become acceptable. By focusing on the various features of these instruments, we propose three strategies for answering this question theoretically: objectively reduce the costs, reduce the visibility of the costs, and identify compensation strategies, i.e., strengthen the benefit side of the equation. Based on a conjoint analysis for Switzerland, our results demonstrate that reducing objective and perceived costs may indeed strengthen support for incentive-based policy instruments, whereas cost compensation does not seem to work as well. We show, moreover, that the latter can be explained by the fact that substantial numbers of voters do not understand or are not convinced by the commonly proposed mechanism of environmental taxes. Given that voters do not believe in the usefulness and efficacy of incentive-based policy measures, no cost compensation is feasible.

Keywords

Incentive-based instruments Energy policy Public support Multifactorial survey 

Notes

Acknowledgements

This research was conducted within the National Research Programme “Managing Energy Consumption” (NRP 71) funded by the Swiss National Science Foundation and supported by the IMG Foundation. We thank Philippe Thalmann and the anonymous reviewers for helpful comments on earlier versions of this article, and Wayne Egers for linguistic assistance.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Institute of Political ScienceUniversity of BerneBernSwitzerland

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