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A recurring challenge for climate policy is political backlash. Over the last decade, we have seen prominent examples like the repeal of the carbon tax in Australia in 2014, the ‘Yellow Vests’ protest against the French carbon tax between 2018 and 2020, and the rollback of climate policy in the transport sector in Sweden between 2022 and 2024. A common argument put forward to explain this backlash is distributional concerns – that carbon and fuel taxes are regressive, disproportionately burdening low-income households. Yet, these prominent episodes often look like middle-class revolts. Studies find that the Yellow Vests supporters in France had ‘modest incomes’, but few came from the poorest deciles of the income distribution. Similarly, a study of Swedish fuel tax protesters found that they had relatively high incomes. This brief proposes a complementary explanation to regressivity: when the income distribution becomes more polarized – with stronger growth at both tails relative to the middle – the tax burden can shift toward the middle. A simple three-agent example illustrates how polarization can ‘squeeze’ the middle class, potentially undermining the durability of climate policy even when the poorest are compensated.

Key points from the FREE Network Policy Brief

• A tax can look progressive overall while still squeezing the middle class. The brief’s three-group model shows that when the middle’s income grows more slowly than both the bottom and top, the middle can become the “relative loser” even if the poorest are doing better relative to the richest.
• Why this happens depends on the good that is being taxed – is it a necessity or a luxury good. If gasoline is a necessity, budget shares tend to fall as income rises; under polarization, faster income growth at the bottom and top can make their fuel-tax burden shrink faster than the middle’s.
• Compensating only the poorest may not prevent backlash. The brief argues that standard fixes like revenue recycling (e.g., dividends aimed mainly at low-income households) may leave a growing political vulnerability unless policy also addresses middle-income pressure - through measures like middle-income tax relief or making substitutes (like EVs) more affordable.

Meet the author

: Assistant Professor, Stockholm Institute of Transition Economics (SITE); affiliated researcher at the House of Sustainable Society (formerly MISUM)