The (indirect) Effects of Windfall Funds on Sustainability Behavior: Insights for Carbon Fee Dividends

Motivated by proposed Carbon Dividend legislation in the U.S., we test the impacts of a monetary windfall on sustainability behavior under information conditions about the source of the funds. We find that windfall funds, particularly when presented as a refund, positively impact stated intent to engage in transportation-related sustainable behaviors. Evidence suggests that participants are sensitive to compensation amounts, where a higher compensation amount led to a higher rate of sustainable behavior intention. We also find a small positive spillover effect from individuals who intend to spend the windfall on transportation-related activities and their stated future sustainable behavior, although results are driven by differences across participants’ source of environmental motivation. Socio-demographics may partially explain this result. A connection to the environment, either through previous donations or employment, or a belief in human-induced climate change, produced higher declarations for pro-environmental behavior. Our results provide important insights into the indirect behavioral effects of a (carbon fee) dividend, and provide avenues for future research.