Sweden's Carbon Tax

About

Sweden's carbon tax is an economic instrument designed to reduce greenhouse gas emissions by imposing a financial penalty on activities that emit carbon dioxide. Introduced in 1991, it is one of the earliest and highest carbon taxes globally, currently set at SEK 1,190 per metric ton of CO2. The tax primarily targets fossil fuels used for heating and transportation, excluding electricity generation, which is largely decarbonized in Sweden. The carbon tax has contributed to a decline in Sweden's carbon emissions while supporting economic growth. It operates alongside the EU Emissions Trading System (EU ETS), covering sectors not included in the ETS. Despite exemptions for certain industries, the tax has been effective in encouraging energy efficiency and renewable energy use. Revenues from the tax support the general budget, contributing to climate-related initiatives. The tax's design ensures low administrative costs, making it a model for other countries implementing carbon pricing policies.