To preserve our climate and reduce carbon emissions, countries around the world are developing different strategies and making new agreements. Not only is the carbon tax in Sweden one of the highest carbon taxes in the world, but it is also one of the most effective policies in the country, making it a leading example in the fight against carbon. climate change.
Carbon dioxide is the compound primarily responsible for the heat-trapping greenhouse effect in the Earth’s atmosphere and is therefore one of the primary causes of global warming. To reduce emission levels, more and more countries around the world have started to introduce carbon pricing, or a tax designed to mitigate or remove the negative externalities of carbon emissions, known as the carbon tax. Since August 2021, 27 countries have implemented a form of carbon tax, which covers a total of 5.5% of global greenhouse gas emissions. This carbon price will encourage consumers and businesses not only to reduce carbon emissions and energy consumption, but also to improve energy efficiency and increase the use of alternative renewable energies. Sweden is one of the first countries to introduce such carbon taxes.
In 1896, a Swedish scientist Svante Arrhenius was the first to calculate how the increase in carbon dioxide in the atmosphere, by greenhouse effect, could increase the surface temperature of the Earth. Two decades later, Sweden began its long history of levying energy taxes on energy products. Gasoline has been taxed since 1924 while diesel has been taxed since 1937, and a tax charge has been imposed on coal, oil and electricity for heating purposes since the 1950s. The levy on all of these products was a single tax called “energy tax”. When it was implemented at the time, it is interesting to note that it was not seen as an environmental measure, but rather as a tax tool intended solely to increase tax revenue. A the carbon tax was then introduced in 1991 alongside the already existing energy tax. It has remained a cornerstone of Swedish climate policy.
Some reviews describe the carbon tax in Sweden as relatively narrow, as only 40% of its greenhouse gases are covered. In fact, the major polluting sectors responsible for 70-75% of Sweden’s emissions did not reduce their emissions, but contributed even more greenhouse gases. The biggest polluters in the country are mainly companies that manufacture construction materials such as steel and concrete. Due to the exemptions and exclusions, large emitters and exempted industries had no reason or incentive to reduce their emissions, leaving the Swedish carbon tax below its emissions reduction potential.
Currently, Sweden levies the highest carbon tax in the world at $126 per metric ton of carbon dioxide. The tax is mainly levied on fossil fuels used for heating purposes and on motor fuels. The country also has one of the highest levels of energy consumption in the world while producing one of the lowest levels of carbon emissions in the developed world. Since implementing its carbon tax some 30 years ago, Sweden has not only been able to reduce its national carbon emissions, but has also maintained solid growth in gross domestic product (GDP).
A 2019 study by economist Gilbert Metcalf found no negative impact on the region’s GDP since the adoption of the carbon tax. In fact, the tax may even have had a slightly positive impact on GDP. Sweden’s GDP per capita grew by more than 50% between 1990 and 2019 in real terms (adjusted for inflation). The country was able to reduce its fossil fuels to less than 2% of its electricity production, while its GDP grew at about the same rate as Germany’s. Metcalf suggested that this positive effect could be partly because carbon tax revenues are used to reduce other types of taxes.
With the right policies, it is possible to reduce emissions and grow economically simultaneously. In Sweden’s case, the country’s carbon tax has succeeded in making businesses more competitive by reducing their climate-related risks and accelerating the development of greener alternatives. In the pursuit of preserving our global climate, Sweden would be the best example and a useful case study for other countries to follow. Waiting for an international agreement is no excuse for inaction.
You might also like: Pros and cons of carbon tax: is carbon pricing the right policy to implement?