Chapter 5: The carbon tax in Sweden
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Economists consider carbon pricing as a central component in climate policy and often put much emphasis on carbon taxation as the prime instrument. It is assumed to bring simple, transparent, and cost-effective means to change investment and consumption behaviors. Sweden was among one of the first countries in the world to introduce a tax on CO2 and the Swedish experience shows that once a tax is put in place - it works. However, while the Swedish carbon tax has worked smoothly in most respects, the introduction of carbon taxes in other countries has failed. In this chapter, we try to give a broad background that suggests some explanations as to why this tax was possible in Sweden when it has been so elusive elsewhere.