FEATURE STORY

When It Comes to Emissions, Sweden Has Its Cake and Eats It Too

May 16, 2016

World Bank Group

STORY HIGHLIGHTS
  • For over two decades, Sweden has managed to decouple growth from CO2 emissions.
  • Speaking at the Carbon Price Leadership Coalition, Swedish Minister of Finance Magdalena Andersson described the country’s CO2 tax.
  • Current low oil prices offer a window for setting a price on carbon emissions.

Sweden has the rare distinction of having consistently curbed carbon dioxide emissions over the past two-and-a-half decades while enjoying solid growth. In so doing, it has set a model that much of the world could emulate.

Sweden introduced a CO2 tax in 1991. At the time, the price was EUR29 per ton, and it has since risen to today’s price of EUR137 per ton – the highest CO2 tax rate in the world. The effect of such a tax on fossil fuel consumption has been, among other things, a rise in the contribution of biomass to district-level heating from 25 percent in 1990, to 70 percent in 2012.

Speaking at a recent High Level Assembly of the Carbon Price Leadership Coalition, Swedish Minister of Finance Magdalena Andersson, said “We’ve had GDP growth of 60 percent, and at the same time, our emissions have been reduced by 25 percent. So, it shows that absolute decoupling is possible.”

According to Andersson, a CO2 tax is relatively easy to administer and the tax revenues can be used where they are judged to contribute best to the overall goals for the society.  Yet, developing countries exploring this approach should also ensure they build capacity accordingly.

In addition to the global benefits of reduced emissions, a price on carbon also paved the way for small and medium Swedish companies to develop new technologies that are competitive in the global marketplace.

“So, putting a price on carbon is not only the morally right thing to do,” said Andersson, “it's also economically smart politics.”

Reflecting on the unusually protracted phase of low oil and commodity prices, Andersson also argued that now is the time to put the price on carbon, and phase out fossil fuel subsidies. Absolute decoupling on a global level can only be reached if more countries introduce cost effective carbon pricing.

"Climate change is the largest challenge of our generation, and we just have to do something about it,” said Andersson.

“We have all the facts, we know how to stop climate change, we just have to do it.”



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