Driving a Green Economy through Carbon Taxation? Learning from the Nordic Experience

Abstract: Carbon taxation can be a crucial policy to transform towards a greener economy, which was identified as a key strategy to achieve sustainable development at the United Nations Conference for Sustainable Development (UNCSD) in 2012. As more countries consider the introduction of carbon taxation and other carbon pricing mechanisms, it’s relevant to learn from the experiences in Nordic countries, which have had carbon taxation in place since the early 1990’s. The purpose of the thesis is to contribute to increase the understanding of how/to what extent carbon taxes has been a driver of greener economies in Nordic countries. In order to understand the progress towards greener economies, a horizontal review has been conducted according to 10 green economy indicators, including energy intensity, carbon intensity and emissions intensity in the period 1990-2012. To estimate the contribution of carbon taxes for the progress, ex-post studies about carbon taxation in Nordic countries have been reviewed according to criteria for environmental policy evaluation, including environmental effectiveness, equity and distributional effects, and effects on industrial competitiveness. Analysis of the indicators shows that Nordic countries perform well on green economy indicators, and the review of ex-post studies indicate that the carbon taxation has contributed to the performance on some of the green economy indicators in combination with other policy instruments. Based on the findings, a number of policy learnings regarding carbon taxation are proposed, methodological challenges are discussed, and further research is suggested.