The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001-2005

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This new report commissioned by the Environment and Finance Group of the Nordic Council of Ministers continues the tradition of reviewing the use of economic instruments in environmental policy in the Nordic countries by providing a comprehensive overview. At the same time, this report extends the country coverage and content of the report. The application of economic instruments is not only discussed for the five Nordic countries, but also for the three Baltic countries. In addition, a discussion on the opportunities and shortcomings associated with the use of economic instruments in the field of environmental policy has been undertaken. The report is a follow-up of the previous five reviews – the last was published in 2002 (TemaNord 2002:581) – and discusses the latest development of the application of economic instruments covering the time period 2001-2005.




Since the 1970s, Sweden has made wide use of environmental taxes and charges as well as other economic instruments in environmental policy. The number of economic instruments currently applied is striking when compared with the situation in other EU Member States (OECD, 2004). Already in the early 1990s, Sweden implemented a tax shifting programme of around 1.8 billion EUR, when taxes on energy were raised while other taxes, such as income taxes, were lowered. An even more challenging fiscal programme commenced in 2001 as the Swedish government announced implementation of a green tax shifting programme of 30 billion SEK (around 3.3 billion EUR) over a ten year period. This included increases in environmental taxes and simultaneously reductions in other taxes, mainly taxes levied on income. The tax shifting programme can be said to be proceeding according to the plan considering that a shift of 10 billion SEK (1.1 billion EUR) was achieved during the first four years of the programme (period 2001–2004) and a further shift of 3.8 billion SEK (430 million EUR) is planned for 2005 (Speck, 2005). By far the largest share of revenues raised by environmental taxes originates from taxes levied on energy products and the carbon dioxide tax which have been raised continually over recent years.


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