Sweden's carbon tax

Sweden introduced a carbon tax in 1991. At the time, the price was SEK 250 (EUR 24) per tonne, and it has since increased to SEK 1 200 (EUR 114) in 2021 – the highest CO2 tax rate in the world. Before making any adjustments to its carbon pricing mechanism, the government in Sweden identifies groups that will be most impacted, and targets communication of the policy changes to their concerns. The gradual increase of the tax level also means that households and businesses are given enough time to adapt, which has improved the political feasibility of the increases and promoted trust in the carbon price. Any increase has also typically been combined with general tax relief in other areas for households and firms to avoid increases in the overall level of taxation, address undesirable distributional consequences and stimulate job growth.

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