Determinants of firms’ acceptability of carbon taxation: a systematic literature review

Abstract

Carbon tax is a key policy instrument for reducing greenhouse gas emissions and achieving carbon neutrality. However, the adoption of carbon taxes remains slow, uneven, and often below recommended pricing levels, limiting effectiveness. While much research has focused on household acceptability, firms’ acceptability of carbon taxation is comparatively underexplored. This systematic literature review examines 109 screened articles using the RepOrting Standards for Systematic Evidence Syntheses (ROSES) protocol to identify key determinants shaping firms’ acceptability. The results highlight three critical factors: firm and industry heterogeneity, political and institutional environment, and policy design and implementation. Firm-specific characteristics, such as emission intensity, trade exposure, and market structure, shape firms’ acceptability of carbon taxation. Political and institutional factors, including business lobbying, governance transparency, and trust in government, also play a significant role. Furthermore, policy design elements–such as tax rate predictability, revenue recycling, and complementary measures–determine acceptance of carbon tax policies. The study underscores the need for carbon tax frameworks that account for firms’ economic and competitive concerns while maintaining environmental effectiveness. Transparent governance, stakeholder collaboration, and targeted policy mechanisms can enhance policy acceptance.