Since the 1980s, Nordic policymakers have demonstrated a forward-thinking and comprehensive approach to sustainability by utilising environmental economic instruments. The studies of Denmark, Finland, Norway, and Sweden have shown several insights into each green charge’s effectiveness and design. While the charges generally fall short of the optimal levels needed to internalise environmental externalities fully, the precision of the charge often influences policy outcomes more than the charge level itself. This highlights the importance of carefully precisioned charges that strengthen the effectiveness and, hence, the desired behavioural change.
Measuring price elasticities lets us know how much demand shifts due to price changes. This can indicate what impact economic instruments may have on the market. However, we have also seen (such as for the Swedish aviation tax) that the effect of policies may be even higher than what can be explained solely by the price elasticities. This may be attributed to the signalling effects of the policies. However, limited data makes it difficult to assess their price elasticity, hindering the ability to predict behavioural responses.
The comparison shows a strong link between public and industry acceptance and the likelihood of political alignment, which reduces policy instability over time. Policies that share synergies with other national objectives and where equity is more present (progressive rather than regressive) tend to be more publicly acceptable.
The study also highlights a significant gap in the scientific evaluation of green charge policies, limiting evidence-based policy design. Government reluctance to implement policies step-wise, e.g., through control groups, to control for the effect on the market, hinders progress on coherent evaluations. However, research indicates that public acceptance of policy experimentation is often underestimated, suggesting opportunities for more experimentation with policy implementation programs. Scaling up successful small-scale policy experiments would require careful adaptation from control groups to broader contexts to understand and monitor the effects. This approach could ease the evaluation of policies and, with more precision, be able to measure causal relationships.
However, some interests when designing environmental charges are unavoidably conflicting. A notable tension exists between setting charge levels high enough to internalise externalities while ensuring they are politically and socially acceptable. The Norwegian government’s plan to increase CO2 taxes on waste incineration illustrates this dilemma, facing industry resistance despite the positive environmental impact. Similarly, Sweden’s aviation tax faced significant pushback, leading to its removal, demonstrating the balance needed between sustainability goals and industry acceptance. This challenge is particularly present for export-oriented industries, where competitiveness concerns heavily influence the acceptance and political will of implementing green charges.
This is, as mentioned in the introduction, not only a trend seen in the Nordic countries. Over the past 15 years across the European Union, there has been a noticeable shift away from green charges in favor of subsidies. Subsidies are often used to encourage innovation, support the development of new green technologies, or lower the barriers for adopting sustainable practices. While they can stimulate the green transition, they don't penalise pollution or directly reduce harmful behavior. Instead, they offer financial incentives to guide positive action, such as renewable energy adoption. Green charges on the other hand, serve as tools to internalise the external costs of pollution. As these taxes directly address the "polluter pays" principle, those responsible for environmental damage also contribute to its mitigation. Moving away from green charges risks losing an efficient, market-driven mechanism to address behavior harmful for the climate and environment. Environmental and climate problems are often urgent and systemic, which requires tools that can both fund solutions and incentivise behavioral changes. While subsidies alone may drive innovation, they do not sufficiently discourage existing unsustainable practices, making environmental taxes an essential complement in the green transition strategy.
In conclusion, green charges hold significant potential to address market failures and mitigate environmental harm. However, achieving the desired outcomes demands thorough evidence-based policy design, addressing trade-offs such as environmental effectiveness, equity, and acceptability. All these aspects become increasingly important for every year, as people become more aware of environmental justice and the effects of climate change. This necessitates not only more comprehensive impact assessments but also a willingness to test and refine policy over time. Finally, the analysis clearly shows the importance for the Nordic countries to keep ensuring scientific evaluation of environmental economic instruments, to not fall behind and to dare believe that we can still be a frontrunner in a global context.