Why carbon taxes need to be high enough: on the (limited) negative compensatory effects of minimum contribution levels on voluntary pro-environmental behavior [Author Accepted Manuscript]

In light of discussions revolving around whether carbon taxes undermine voluntary pro-environmental behavior or help raise summary contributions through forcing free-riders to contribute, the current paper investigates the effect of low vs high minimum contribution levels (MCLs) on pro-environmental behavior (PEB). We report two pre-registered, incentivized experiments (German samples, N1 = 228, N2 = 293) using the Greater Good Game, in which participants allocate an initial endowment either toward their own, or a shared group or an environment account. This paradigm allows crowding-out of PEB after the introduction of MCLs in a pro-social (non-selfish) fashion and thereby provides a viable option even to those who are dispositionally not inclined towards selfishness or free-riding. After introducing MCLs, we find that individuals do not fully negatively compensate for forced contributions to the environment account. Although voluntary contributions did decrease slightly after the introduction of either high or low MCLs, the decrease was comparable across both conditions. Consequently, a higher MCL yielded higher summary contributions. Thus, in forcing free-riders to contribute, a sufficiently large MCL is able to offset negative compensation of voluntary contributors. We conclude that the overall benefit for the environment is largest with a carbon tax high enough to surmount negative compensation.