Climate

Beyond the Price Tag: Why Public Perception of Carbon Pricing Matters

LIFE COASE – Collaborative Observatory for ASsessment of the EU ETS

Authors

Alessia Casamassima

Type

News

Date

Dec 15, 2025

Data Stories Looking beyond the decarbonization-competitiveness dilemma

Introduction

Achieving the goals of the Paris Agreement and the European Green Deal requires not only ambitious climate policies but also strong public support. Europe aims to reach carbon neutrality by 2050, but this transformation also depends on the understanding, trust, and participation of its citizens, businesses.

One of the most powerful tools Europe has to reduce greenhouse gas emissions is the EU Emissions Trading System (EU ETS). The EU ETS has already contributed to impressive emission cuts: by 2024, emissions in covered power and industrial sectors had dropped 50% below 2005 levels [European Commission, 2025].

Yet, despite these successes, many citizens and small businesses remain unaware of how the ETS works, what it achieves, or how it affects them. The system’s complexity and technical nature often obscure its benefits, leaving the public with a one-sided perception focused on costs rather than climate gains.

Beyond the Price Tag: Why Public Perception of Carbon Pricing Matters

Research from the OECD and IMF supports that public backing for climate policies depends heavily on trust in government and the fairness perceived in the policy [OECD, 2024; IMF, 2023]. When citizens see carbon pricing only as a tax, opposition increases. Conversely, framing the policy around revenue recycling, clearly showing how funds are reinvested into green innovation or social support, significantly boosts acceptance [IMF Staff Discussion Note, 2023].

The stakes are rising with the introduction of the EU ETS II, which will expand carbon pricing to the road transport and building sectors. Unlike the industrial focus of the original ETS, this new system will directly impact household budgets via heating bills and fuel costs.

This shift moves carbon pricing from corporate balance sheets to consumers’ wallets, making the “fairness” argument critical. The Social Climate Fund (SCF) has been designed specifically to mitigate these impacts by pooling revenues to support vulnerable households [European Commission, SCF, 2024]. However, if citizens are unaware of support schemes, the risk of backlash remains.

The two main points to consider are:

The risk: if the narrative is dominated by “cost,” opposition can grow quickly, spurred by concerns over price volatility and fairness.
The opportunity: if citizens understand the system and see its benefits, such as reinvestment in energy support, they are significantly more likely to accept it.

Evidence-Based Communication: Lessons from CAPABLE

The study of perception and support is gradually receiving the recognition it deserves, supported by a growing body of research and targeted projects. An example of such initiatives is the CAPABLE project.

CAPABLE aims to improve the design and acceptance of climate policies by making them more cost-effective, fair, and socially feasible. It tackles the challenge of balancing policy ambition with social and political feasibility through better economic analysis and behavioural insights. One of its main objectives is to boost public acceptance by providing clear, accessible scientific evidence on the socio-economic impacts of climate policies.

The CAPABLE team has conducted a large-scale survey across several European countries (with representative samples of around 1,000 respondents per country, and 19,328 validated responses) to measure citizens’ perceptions, behavioural changes, and support for different climate measures, including carbon pricing. This two-wave survey explores the key determinants of public support for policy instruments like the ETS and offers unique insights into how people think about fairness, costs, and trust in institutions.

The data shows that citizens do not judge policies like the ETS solely on their environmental impact, but on how those policies are framed in their daily lives.

If the public perceives climate measures as drivers of innovation and health, support is robust. However, if the prevailing perception is one of economic unfairness, public support collapses, exposing the system to sudden political shocks. While a core group views the ETS as a logical mechanism for long-term modernisation, the majority views it through a lens of personal economic security. For these citizens, the technical success of the ETS is irrelevant if they perceive it as a threat to their purchasing power or regional identity.

Therefore, the durability of the ETS depends on managing perception through transparency. When the path from revenue collection to community reinvestment is invisible, trust erodes. To succeed, the ETS requires more than just technical efficacy; it needs a compelling social narrative. The policy is only as strong as the public’s belief that it is fair. Governments must ensure that the benefits of decarbonization are not just real but clearly visible to the communities they affect.

Conclusion

The transition to net zero cannot succeed without informed citizens, skilled policymakers, and international cooperation; indeed, the transition to net zero is the result of a social agreement. As the OECD notes, trust in public institutions is a significant factor influencing the public acceptability of environmental taxes [OECD, Trust & Democracy].

A policy cannot survive on emission reductions alone; it requires a social narrative. Success depends on whether citizens feel they are partners in the journey rather than just subjects of it. By prioritising research into public perception, as exemplified by the CAPABLE project, policymakers can ensure that Europe’s path to net zero is not only scientifically valid but also socially equitable and broadly supported.