Cost sharing mechanisms for carbon pricing : What drives support in the housing sector?

The building sector offers an important lever for reducing carbon emissions, and carbon pricing is considered as one essential policy instrument to unleash this potential. Yet, carbon pricing in residential buildings faces challenges, especially in rental housing since the financial burden and thus the incentives to reduce carbon emissions can be allocated differently between landlords and tenants. Moreover, preferences for cost sharing can diverge greatly according to households’ perceptions of the carbon price. We analyze the support for different cost burden sharing concepts using a survey experiment among 12,000 German households conducted in 2021. Our results suggest that the price level and revenue use hardly affect support, whereas tenancy – and thus self interest – as well as perceived fairness of the sharing concept turn out to be important determinants. Overall, a sharing mechanism according to the energy efficiency of the building is the most preferred cost allocation among our participants