Sweden’s carbon tax
In order to limit global warming to 1.5°C – as called for in the Paris Agreement – global greenhouse gas emissions need to reach net zero around mid-century. The transition to net-zero emissions requires a well-balanced mix of long-term policy measures. Pricing of greenhouse gas emissions is central for an ambitious and effective climate policy.
'Polluter pays' principle
Pricing carbon emissions is a way of applying the polluter pays principle, in which the costs of pollution are borne by those who cause it. This ensures that emissions are reduced in the most cost-effective way, while stimulating the development and deployment of new, clean technologies. Carbon pricing can be achieved either through a carbon tax, or through an emissions trading system such as the European Emissions Trading System (EU ETS). The information on this page relates mainly to Swedish experiences with carbon taxation. For more information about the EU ETS and ETS2, please visit the website of the European Commission.
EU Emissions Trading System (EU ETS)
Carbon pricing in Sweden
Energy sources were first taxed in Sweden in the 1920s. A carbon tax was instituted in 1991, alongside an already existing energy tax. Over time, the carbon tax increased in importance, contributing to a broad range of environmental and climate objectives. For example, the carbon tax has provided incentives to reduce energy consumption, improve energy efficiency and increase the use of renewable energy alternatives. Since 2005, the main principle for carbon pricing in Sweden is that emissions are priced through either the carbon tax or the EU ETS.
The Swedish carbon tax has historically focused on fossil fuels, leaving biofuels mainly untaxed. However, in July 2018 the national reduction obligation scheme – a regulation for mandatory blending of biofuel into petrol and diesel – was introduced. Biofuels used for blending are since then taxed at the same rate as their fossil counterparts.
Carbon tax easy to implement
Swedish experience shows that a carbon tax can be easy to implement and administer, at low costs to authorities and operators. This is particularly true if existing revenue collecting systems, such as systems for levying other excise taxes on fuels, are already in place. Another feature of the carbon tax that reduces costs associated with its administration is that tax rates in Swedish tax law are expressed in common trade units (volume or weight).
The Swedish carbon tax is based on the principle of using fuels as the tax base. As carbon emissions released in burning any fuel are proportional to the carbon content of the fuel it is not necessary to measure actual emissions, which greatly simplifies the system.
Swedish carbon tax rates
The carbon tax was introduced in 1991 at a rate corresponding to SEK 250 (EUR 25) per tonne fossil carbon dioxide emitted and has gradually been increased to SEK 1 450 (EUR 125) in 2024, for fuels with 100 % fossil content, for example, natural gas or coal (currency conversion based on an exchange rate of SEK 11.58 per EUR). By increasing the tax gradually and in a stepwise manner, households and businesses have been given time to adapt, which has improved the political feasibility of tax increases. Industry covered by the EU ETS is entirely exempt from carbon tax while a lower tax rate initially applied to industry outside the EU ETS. By 2018 the reduced rate for industry outside the EU ETS was phased out.
The carbon tax has successfully been adjusted over time to accommodate for changes in the surrounding policy landscape and to the overall Swedish climate policy. Today the carbon tax and the EU ETS establish explicit carbon pricing for more than 95 percent of all Swedish fossil carbon emissions. Carbon pricing in Sweden has historically evolved in relation to relevant EU-legislation and will continue to do so as harmonised carbon pricing in the EU warrants cost-effectiveness and competitive neutrality.
Sweden's carbon tax generates considerable revenues for the general budget (there is no 'earmarking' of tax revenues in Sweden). General budget funds may, however, be used for specific purposes linked to the carbon tax, such as addressing undesirable distributional consequences of taxation or financing other climate-related measures.
Articles and reports
- Hammar and Åkerfeldt (2011) CO2 Taxation in Sweden. 20 Years of Experience and Looking Ahead (pdf)
- Sweden’s Fifth Biennial Report under the UNFCCC (pdf)
- UN Handbook on Carbon Taxation for Developing Countries (2021, pdf) See chapters 6 and 8 in particular for a presentation of the design and administration of the Swedish carbon tax.
Statistics
Contact
Desk Officer, Tax and Customs Department
Mobile +46 8 405 30 94
email to Karl-Anders Stigzelius
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