4. Social acceptance and fuel taxes

Transportation emissions, especially those from road transportation, account for a substantial part of the Nordic countries’ territorial emissions. Economic theory points to fuel taxation – or more precisely – the taxation of CO₂-emissions from fuels to be the most cost-effective tool to reduce emissions, as it ensures that the polluter pays (e.g., Sivonen & Koivula 2020). Increasing the price of fuel, carbon or fuel taxes provides an incentive to limit driving, switch to more fuel efficient (or zero emissions) vehicles, and adapt everyday practices to achieve larger long-term changes (e.g., choosing to live closer to work or school). As such, ensuring public support for initiatives targeting these emissions is an essential part of the path towards climate neutrality in the Nordic region.

Fuel taxes are, however, also unpopular. They impose direct and therefore very salient costs on consumers, and many are skeptical of the environmental benefits of fuel taxation. As in the case of wind power, it is important to look at the country’s context to understand the variation in and reasons for (lack of) social acceptance for fuel taxes across the Nordic region. As fuel is a globally traded commodity, the price before taxes fluctuates significantly over time, but it does not vary much across borders. National regulation can, however, affect the price at the pump, due to primarily 1) taxes and 2) blending requirements (e.g. biofuel percentage). Moreover, the use of policy instruments varies substantially across Nordic countries. There are many likely reasons for this, including the level of other car-related taxes and the size of the national biofuel industry.

Across the Nordics, the opposition to existing or proposed taxes on fuels has manifested itself in different ways, from protests, lobbying, and petitions to shifts in voting patterns and the emergence of political parties and social movements opposed to taxation.

The following chapter explores how fuel taxes are perceived, what drives social acceptance, and how this currently plays out across the Nordic countries. We conclude with examples of how these issues have been addressed across the region, in line with the structure in the wind power case.

Social acceptance of fuel price increases (and fuel taxes in general) has been less researched than social acceptance of wind power. For that reason, there are fewer studies in the Nordic countries that can be used to give an overview of the status of social acceptance of fuel price increases across the Nordic region.

Using data from the European Social Survey 2016–2017, Sivonen (2023) found that Nordic residents (in this case Norway, Finland, and Sweden) show higher support for carbon taxation compared to the rest of Europe. Büchs et al. (2024) relates this difference to the comparably more socially equal societies in the Nordics.

Table 2: Support for higher fossil fuel taxation

Source: Sivonen (2023). Support is coded based on a scale from 1 “strongly against” to 5 “strongly in favor”. Data is only available for Finland, Norway, and Sweden.

Across these three countries, Sivonen found that the attitude towards carbon taxation was closely linked with political party affiliation; the attitude towards taxation was more positive among those who supported green and leftist political parties, and more negative among those who supported populist right-wing factions (Sivonen 2023). Furthermore, the data shows that while Norwegians are comparatively supportive of carbon taxes in a European context, their support is still lower than that of Swedes and Finns. This aligns with similar findings from the same survey in Fairbrother et al. (2019), who conclude that “the nations whose populations are most supportive of higher taxes on fossil fuels are not those that are more aware and concerned about climate change; rather, they are those with the highest levels of political trust.”

The European Social Survey data can also be used to compare the attitude towards/social acceptance of different climate policies. In most countries included in the survey, the policy ‘Using public money to subsidize renewable energy such as wind and solar power’ is the most popular instrument, while ‘Increasing taxes on fossil fuels, such as oil, gas, and coal’ is the least popular (Davidovic & Harring 2020).

In Finland, attitudes towards fuel taxation appear to be divided. The Finnish Business and Policy Forum has studied the willingness to reform the current fuel tax system in conjunction with energy taxation. Between 2011 and 2024, the preference for reducing fuel and energy taxes has been prevalent, ranging from 33 percent to 54 percent, while support for increasing these taxes has varied between 14 percent and 26 percent. A significant shift occurred between 2023 and 2024. More Finns now support raising taxes (rising from 14 percent to 26 percent), while the desire to lower taxes has decreased (from 53 percent to 33 percent). (Finnish Business and Policy Forum EVA 2024a, 2024b.).

The price of fuel has been debated a lot in politics during recent years. Decreasing the price was an important theme for the Finns Party for the parliament elections in 2023. As a result of that, the recent government program of 2023 outlines that the price of transport fuels will not rise due to the government's measures (Finnish Government 2023), which has led to lowering the excise duty and decreasing the ambition of distribution obligation.

Attitudes towards fuel and energy taxes vary significantly across different political groups in Finland. Supporters of the Green League and the Left Alliance strongly favor increasing taxes, while those aligned with the Finns Party, the Christian Democrats, and Movement Now are more in favor of reductions even after the reduction made in 2023, based on the survey from 2024. At the same time, the majority of the National Coalition Party, Social Democratic Party, and Centre Party supporters are content with the current tax structure; roughly equal shares support increases and decreases (Finnish Business and Policy Forum EVA 2024a, 2024b).

Recent surveys and studies from Finnish Business and Policy Forum EVA explore the attitudes towards fuel taxation in more detail compared to other studies. Despite the respondents being Finnish, we judge that results would look relatively similar in the other Nordic countries. The studies note that attitudes vary within different groups. As mentioned above, attitudes towards fuel and energy taxes vary greatly across different political parties. Furthermore, attitudes vary across different demographic groups, though less than across political views. Men are generally more inclined to support reducing taxes, while women tend to favor increasing them. Younger people are more likely to advocate for tax increases, whereas older individuals prefer tax cuts. Residents of larger cities are more supportive of tax hikes, while those in smaller towns lean towards decreasing taxes. Additionally, individuals with higher education levels are more inclined to support raising fuel and energy taxes. (Finnish Business and Policy Forum EVA 2024a, 2024b).

In Denmark, available surveys are not as detailed, but a recent general survey (NBER 2024) shows relatively high (43%) support for a fuel tax on $45/ton CO₂. There has been a Danish discussion about whether private cars are overtaxed, through a combination of taxes (registration tax, yearly tax, fuel taxes and insurance tax), even if several reductions of registration taxes for mainly smaller cars have reduced the overall car taxation. The Danish Economic Councils showed in a 2021-report that the current taxation does not cover the externalities from car traffic (De Økonomiske Råd 2021), but a more recent analysis by Finansministeriet (2024) has shown that when disaggregating into electric vehicles (EVs) and internal combustion engine (ICE) cars, it is found that EVs are undertaxed, and ICE cars are generally overtaxed. This is the case outside the cities particularly, where congestion is lower, even if fuel taxes are the same. Fuel taxation changes must be seen in this light.

The Danish Ministry of Finance generally opposes earmarking of tax revenue, due to economic inefficiency. There is however a broad political understanding that earmarking can increase social acceptability, particularly for green purposes, as also documented in NBER (2024; figure 9).

In Norway, the general level of support for fuel (or carbon) taxes is relatively high, though somewhat lower than in at least some of the other Nordic countries (see results in Sivonen (2020) referred to above). Harring et al. (2019), in a comparative study of Norway, Sweden, New Zealand, and Australia, found that Norwegians were the least supportive of such taxes. Despite sharing a political culture with Sweden, Norway’s lower support levels may stem from its economic dependence on the fossil fuel sector.

CICERO's annual climate survey covering the years 2018–2024 (Aasen et al. 2023) asks people to take a position on the statement: “We should increase the price of fossil energy sources such as oil, diesel, and gasoline". Those who believe the statement aligns with their own views make up 28 percent in 2024, while those who believe it does not align make up 48 percent. There is a slight decrease in opposition from the previous year. However, the numbers are fairly stable over the years the survey has run (from 2018). There seems to be a slight trend that both strong support and strong opposition are increasing somewhat over the years. That is, more people are taking a clear stance.

Two recent studies explore the social acceptance of specific tax proposals: The study by Tatham and Peters (2023) indicates that the average Norwegian is supportive of increasing the fuel tax by 5 percent but opposed to increasing it by 20 percent. Dugstad et al. (2024) find that households on average would support an increase of NOK 2.7-3.4 in the carbon tax per liter of fuel “if the revenues are earmarked to finance mitigation efforts instead of general public expenses as it is today”, but the majority would prefer a (large) reduction in the carbon taxes for other revenue uses.

Literature reviews and meta-analyses, such as Bergquist et al. (2023), have identified a number of factors that consistently influence the level of public support for environmental taxes. Since a large part of the studies are done in or include a Nordic country, these findings apply well to the Nordic region. These studies emphasize that fairness and perceived effectiveness are key determinants of public support for fuel taxes, as well as the use of the tax revenues. These two main challenges are also highlighted across the Nordic countries:

These challenges are described in further detail in their respective sections below. 

Across the Nordic countries, fairness encompasses a large set of issues, but distributive fairness is central. Concerns for citizens living in car-dependent rural areas is an issue raised particularly frequently in Denmark, Finland, and Norway based on the literature review. Based on the workshop it appears to be a key issue all over the Nordics.

Grimsrud et al. (2020) respondents in Norway identified the need to "avoid increased economic inequality" as the top priority in policy design. Kallbekken and Sælen (2011) similarly found that the financial impact on others is one of the three key predictors of support for fuel taxes in Norway. Expanding the scope to other taxes, Kallbekken et al. (2013) reported that a significant majority of respondents in Norway (82.6%, 69.9%, and 75.2% respectively) “strongly believe that fuel taxes, road pricing and parking negatively affect the welfare of the poor”. This belief in negative distributional impacts is, in turn, a significant predictor of opposition to increased fuel/transportation taxation.

One of the main dimensions of distributive fairness is geography, and in particular the rural-urban divide. In urban areas, alternative transportation (public transportation, bicycle paths etc.), as well as shorter distances and better access to EV charging, make it easier to switch away from fossil fuel use and fossil fuel vehicles, whereas it is much more challenging in rural areas. Uniform increases in fuel taxation have therefore been seen as problematic in Norway. For this reason, recent increases in the general CO₂ taxation were offset by a decrease in other fuel taxes in both 2022 and 2024 (proposed budget) in Norway. The high share of EVs in car sales, and gradually also in the car fleet, means that fewer people are affected by fuel taxes, but as there is a strong difference in EV penetration between urban and rural areas, this has not necessarily made the politics of fuel taxation easier to manage.

The rural-urban divide is also clear in Finland. The attitudes of people living in rural areas, towards the decarbonization of transportation, were assessed in a study by Heiskanen et al. (2024). The majority of rural respondents (9 out of 10) considered substantial fuel price hikes very unfair. Compared to people living in cities, this share is high: 6 out of 10 city residents found the fuel price hikes unfair. The rural respondents saw taxes of various kinds as the source of many problems, and fuel taxes were one of them. The aversion to taxes was connected to the financial struggles of the respondents, as well as a general view on the government neglecting to deliver services for the countryside and investing unfairly in the development of cities instead. (Heiskanen et al 2024). In addition, according to a survey by Kurronen (2022), 61 percent of Finns believe that high fuel prices excessively limit people's freedom to move and choose their place of residence, which adds to the rural-urban divide, as people are more car dependent in the rural areas.  Regional economic disparities can, to some extent, explain the aversion towards fuel taxes as well as the perceived unfairness in the distribution of government support between cities and rural areas. According to Rajavuori (2023), the age of the car fleet indicates that people living in the most rural areas are driving older cars than those in cities, which is also an indicator of lower wealth in rural areas. It may seem unreasonable to rural residents if the fuel tax is increased, and their costs rise while the city residents’ EVs are supported through lower taxation. Rajavuori (2023) states that low-income and vulnerable people should be taken into consideration when designing climate action, and the effect on those groups should be evaluated regularly. The study also suggests that the fair transition to sustainable mobility and transport entails that overall car dependency is reduced. 

There has been an overall worry that the fuel taxes will fall disproportionately on low-income households in Finland, but the statistics do not support this conclusion (Sahari & Palanne 2021). On average, low-income households do not incur more fuel costs in relation to their income compared to average-income households. In Finland, the share of fuel expenses increases with income between the low second and high seventh income category. The share decreases in the highest income categories. However, the tax burden could be balanced by recycling tax revenue back to households, which could also lead to fuel taxes being considered more acceptable (Sahari & Palanne 2021).

In Denmark, there is a general view that if fuel taxes are increased, other car-related taxes should be reduced due to the high level of taxation on ICE cars, as mentioned previously. The challenge is thus to find ways to reduce other taxes without undercutting the CO₂-emission reductions, which should occur as a result of an increased fuel tax.

Concerns were also voiced in the workshop in terms of an urban-rural dilemma in Denmark. It was noted that if you only look across the national income distribution, those hit hardest by fuel taxes are the middle class and upper middle class, as the poorest deciles have low rates of car ownership. However, in the rural areas, poorer households with car dependency are hit disproportionately hard. Given that there is a growing rural/urban divide in Denmark, this may decrease the acceptance of higher fuel taxations in rural areas further where incomes are lower, and transport needs are higher; many people can only afford to buy used cars. They will, therefore, have difficulty in changing to a suitable electric vehicle.

The second cross-Nordic challenge relates to how effective taxation is perceived to be in reducing fuel use. The effectiveness of a tax should be seen in relation to its stated goal. In our case, the relevant goal is to lower emissions from road transportation through reduced fuel use (other taxes are designed to generate revenue). The perceived effectiveness of a tax is often a very strong predictor of the level of support, but the perceived effectiveness may differ from the actual effectiveness. This was also brought up in the online workshop, highlighting that there is a perception of fuel taxes being ineffective in driving change across the Nordics. While these perceptions do not always align with the evidence on actual effectiveness, they should be handled to avoid resistance.

Many Norwegians are skeptical about the ability of taxes to reduce emissions, which contributes to opposition. Grimsrud et al. (2020) noted that many respondents do not see or believe in the connection between taxes and emission reductions. Kallbekken et al. (2013) also found that perceived (low) effectiveness is the most powerful determinant of support for transportation-related taxes, including road pricing and parking fees.

In Denmark, most car users seem to acknowledge that higher fuel prices lead to lower consumption, and thus to lower CO₂-emissions. This was emphasized in a recent survey (Vejdirektoratet 2024) by the Danish Road Directorate on why people continue to drive slower on the highways, even if fuel prices have come down again after the spike in 2022; 61 percent of the respondents point to increased awareness of fuel use at various speeds. As a general observation, studies have shown that people generally accept fuel price increases that are due to market fluctuations, as ‘this is how it has always been’, but they also reduce fuel use to a lesser extent (compared to an increase due to taxes), as the expectation is that the price will come down again (which is less likely for a tax-driven price increase) (Bajo-Buenestado 2016).

In Finland, the perceived effectiveness of fuel tax increase has not been much of a debate. It seems that people are more concerned with the price itself than the effectiveness of the price increases. The low price of fuel is seen as more important than, for example, lowering carbon emissions: according to a survey by Kurronen (2022), 53 percent of Finns do not view the high price level of fossil fuels as a good thing, even though it encourages people, companies, and the public sector to transition into low or zero carbon technologies. In a survey regarding Finnish opinions on how to lower emissions effectively and fairly (Motiva 2024), 74.5 percent of respondents stated that the notable increase in fuel prices would be very unfair, and only 9 percent felt that it would be acceptable. When asked if the increase in fuel prices would affect their own car usage, 40 percent felt that it would not affect it at all, 30 percent thought there would be of little effect and 24 percent thought it would affect their car usage greatly.

Different initiatives can be taken to address issues regarding fairness and perceived effectiveness when increasing fuel taxes. This section contains examples of how social acceptance has been addressed across the Nordic countries in relation to fuel price increases/fuel taxes. The examples largely connect to the main challenges outlined above.

The examples covered are:

In a review of Denmark’s 2025 climate goal, a gap had been identified, and the government suggested to increase the hydrotreated vegetable oil (HVO) biofuel fraction of diesel as one of the actions to close the gap.

Actually, it turned out that the gap was smaller, so the initiative was not needed for reaching the 2025 goal. But the government carried through, presumably as the initiative also contribute to the 2030 goal, where agriculture then can deliver a little less.

As the main effect would be from the price increase (HVO is expensive) and from reduced fuel sales at the borders, CONCITO and others suggested just increasing the diesel tax instead, and – if deemed politically needed to increase political acceptance by keeping the total ICE car taxation constant – compensating private car owners by lowering the yearly taxes for diesel cars.

The haulers tried to use this as an argument to delay the start of road pricing for trucks.  They got a temporary rebate and (increased) support for green trucks instead.

Urban-growth agreements (UGAs) have been an important policy tool in Norway since 2016 for managing urban mobility challenges. With UGAs “all three levels of government must implement measures and policy” and “the national government grants 50% of the investment costs for large infrastructure projects, with the county and municipal contribution mainly covered by toll-road payment” (Tønnesen et al. 2019). The UGAs are, therefore, tools that directly reduce urban road traffic, and indirectly enable higher fuel taxes by facilitating alternative transport (public transportation and active transportation). Tønnesen et al. (2022) argue that “if Norway is to reach its national climate goals, policy structures to promote climate-friendly transport outside urban areas are needed”, and that one useful strategy could be the use of policy packages (inspired by the UGAs) to "strengthen the integration of land-use and transport-system development.”

The Finnish Transport and Communications Agency offered scrapping premiums in 2020–2021 to people who scrapped their cars taken into use before December 2010 to replace them with a new car, public transportation tickets or an electric-assisted bicycle. The aim was to reduce traffic emissions and renew Finland's vehicle fleet. Depending on the fuel type of the car being purchased, the scrapping premium was between 1,000 and 2,000 euros. For the purchase of a public transportation ticket or an electric-assisted bicycle, the bonus was up to 1,000 euros. (Traficom 2021.) The scrapping bonus was very popular; there were a lot of applications, and the allocated 8 million euros were used up within five months. The majority of applications (70%) were for purchasing an electric bicycle. According to statistical analysis (Hytti et al. 2023), as a measure to reduce emissions, the scrapping premium campaign was targeted quite equally among different income groups, and more equitably than actions solely aimed at new car buyers. Even though the campaign was short-lived and the effect on emission reductions were not very high, the effectiveness could be increased by tightening the criteria for purchasing new cars to exclude cars that use gasoline or diesel. (Jääskeläinen 2021). As the premiums were very popular and it was noted they are equal for different income groups, there is an indication that this type of policy instrument can encourage a shift away from high-consumption cars in a socially acceptable way.