CERE’s Runar Brännlund comments on the report “Greenwash - An analysis of the efficiency of Swedish environmental taxes”. Since the report was released in Swedish it has frequently been used in debate articles around Sweden and it is now available in English. Main conclusions from the report show that developed forceful and effective tools for reducing global emissions of greenhouse gases are already in place. Runar therefore finds it somewhat of a mystery why relatively complicated and obvious ineffective additional instruments are put into place, read his comment.

The report on Svenskt NäringslivIn the report, I have looked at environmental taxation in Sweden; whether the preexisting taxes can be classified as true environmental taxes, or if they are more greenwashed fiscal taxes. I also take a closer look at some more recent taxes; the aviation tax, the chemical tax, and the new system for vehicle taxation, the so-called bonus-malus system. My conclusions concerning how efficient the different taxes really are from an environmental perspective, are somewhat mixed. The carbon tax is unambiguous; it is an efficient environmental tax, the accomplished emission reduction is achieved in a cost efficient way.

The taxes fail to address the issues

flygplanWhen it comes to the more recent taxes (aviation, chemical and cars), I am more critical. The tax on aviation is a good example of a poorly designed environmental tax, for one, the tax is a “per trip tax”. For a flight originating from Sweden to a destination within Sweden or EU the tax is SEK 60 per flight, and from Sweden to a destination outside EU the tax is SEK 200 per flight. This means that the tax does not directly address the emissions. Even if the airplane fly on air, the tax is to be paid and as a result it provides no incentives to fuel substitution or improved efficiency. Another reason is that the tax payment is independent of whether I fly to Oslo, 383 km away, or to Las Palmas, 4,334 km away from Stockholm Arlanda. The emissions of a single flight to Oslo is 58 kg CO2, and Las Palmas 305 kg, which means a kilo price of almost SEK 1/kg for a flight to Oslo compared to SEK 0.19/kg for a flight to Las Palmas. The third reason is due to the airline industry being part of the European Emission Trading System, EU-ETS, which means that any reduced emissions resulting from less Swedish flights, will give way for an increase in emissions somewhere else within EU-ETS.

backspegelEssentially the same logic applies to the chemical tax and bonus-malus system for new cars. Neither does these taxes address the problem at hand. The chemical tax rate is based on the weight of the product, and not on the content of harmful chemical substances. This means that regardless of potential to harm, a washing machine have a considerably higher tax rate (SEK 320) than a mobile phone (SEK 18). The new bonus-malus system implies that low-emission cars receives a direct subsidy plus a zero or very low annual vehicle tax (bonus), whereas a car with relative high emissions are taxed higher. This means that it is not emissions from the use of the car that is subsidized or taxed, but rather the car itself. Hybrid cars are also subsidized, regardless of how they are being used, it is for instance possible to utilize the subsidy to switch from a relative fuel-efficient diesel car to big hybrid car, and then primarily use the petrol engine.

Main conclusions from the report show that developed forceful and effective tools to be used to reduce global emissions of greenhouse gases, such as the CO2 tax and the emissions trading system, are already in place. It is therefore somewhat of a mystery why relatively complicated and apparently ineffective additional instruments are put into place. It will not only make emission reductions more expensive than neccessary, it may in the long run depreciate the credibility for climate policy. As a true friend of the environment I advocate for instruments and environmental policies that have a genuine impact on the environment and maximize benefits of the resources we use. Disguising fiscal taxation with environmental arguments risks undermining confidence in the tax instrument itself as well as the climate policy as a whole.

Read the report at The Confederation of Swedish Enterprise (Svenskt näringsliv) website.

Background

Sweden has long been seen as a forerunner when it comes to environmental policy. One reason is that Sweden was the first country to introduce explicit taxes on emissions of carbon dioxide and sulphur dioxides. The carbon tax was introduced in 1990 at the rate of SEK 0.25 per kg carbon dioxide (€ 25 per ton). Since then it has been increased steadily and is now SEK 1.15 per kg (€ 100 per ton). As a result of this and other measures the emissions of carbon dioxide have decreased by approximately 30% since 1990, in spite of a steady growth in GDP.

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