Photo by: blinow61 / iStock
The carbon tax rate varies from country to country. It ranges from $1 per tonne of CO2 in Ukraine and Poland to $130 in Sweden. And Sweden is an example of a country where an economy with a high carbon tax is growing dynamically and does not suffer from it in any way. The Swedish mechanism for levying this tax is well-designed because, once it exceeds 1% of revenues, the tax rate is reset to zero. The tax has been increased many times, but never abruptly, so that businesses have time to adapt to the changes, gain accounting experience and react to the tax signals.
This is the right approach, as a significant tax increase overnight can change the entire production process. The Swedish model has proved to be effective and the country has been able to reduce emissions significantly as a result. At the same time, the share of taxed energy costs in this country is in line with other countries. If a 1% increase in energy prices is accompanied by a 1–2% reduction in emissions, the tax burden does not increase and the economy has time to adapt to the innovation.
Cover photo: Pavel Byrkin / iStock
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