4. Cross Nordic comparison

In the following, we summarise the cases described in the previous chapter and make a cross-Nordic comparisons. Table 2 gives a schematic overview of the policies and our assessment of them. The criteria are selected to cover the aspects we found to be most relevant in determining the success of the policies. The criteria are:

The extent to which the instrument’s charge level internalises the external costs of the targeted emissions.
The precision of the charge, i.e., how effectively it targets the emitter and the emissions source
The price elasticity of demand and the responses of those affected, highlighting notable differences between short- and long-term effects.
Whether the policy incentivises technology development.
The extent to which the policy avoids leakages, i.e., unintended negative effects.
Equity: The distributional effects of the policy, particularly whether taxes are progressive, regressive, or neutral.
To what extent the policy positively interacts (has synergies) with other policies.
The level of industry and/or consumer acceptance of the policy.
The policy’s political alignment.

Note that the summary can only be considered an indication and not a complete review of the charges. In particular, it is not an assessment of whether the charge should be continued or not. Please see the individual charge analysis in Chapter 0 for more details.

Table 2 shows that the charge levels, in general, are lower than the optimal level to internalise the external environmental costs. Further, it shows that the level of precision is considered relatively higher and more beneficial than the charge level. Less precise charges could require higher levels, but for several of the charges, the levels are considered to not be sufficient even though the precision is relatively strong. The price elasticity is particularly challenging to assess, and relevant elasticities only exist for a few of the studies and, to an even lesser extent, differentiate between the short- and long-term. Only the payers of the pesticide tax are relatively responsive to changes in the tax. For others, there is a lack of substitutes (e.g., aviation) or responses require investments in new technologies (e.g., waste incineration). The incentive for technology development depends on the charge level, precision, price elasticity, other policy designs and the possible responses of the agents; it is particularly assessed similarly to the elasticity criteria. Leakage is only considered to be a substantial problem for the plastic bag tax, where the charge could increase the consumption of paper bags. In other cases, the charges could affect activities in other sectors or countries, but the environmental effect is uncertain. There is a particularly large spread in equity (if the policy is regressive or progressive). For the charges addressing consumers, beverage packing and aviation tax is considered progressive, while electricity tax and the plastic bag tax are considered regressive. Most policies are considered to have positive interactions with other policies and have synergies with other targets. Lastly, there seems to be a strong correlation between consumer and industry acceptance and political alignment; policies that are accepted by the public and the relevant industries are likely to have broader political support.

Table 2: Summarizing the assessments of the policies across cases.
Color explanation: Green=high (►►►), yellow=medium (►►), red=low (►), grey=irrelevant/unknown

Charge	Charge level (degree of internalised cost of externality)	Precision of charge (targeting externality)	Price elasticity of demand	Incentivising technology development	Degree of avoiding leakages	Equity (progressive or regressive tax)	Positive interaction/synergies with other instruments	Acceptance (consumer, industry)	Political alignment
Electricity tax	►► Yellow because the price is high enough to create awareness around consumption, but the environmental externality is not captured by the tax.	► Taxing end consumer, little effect on environmental impact. Higher effect on consumption, but still limited due to relatively inelastic good.	►► Yellow, because the long term elasticity is fairly inelastic, which also can be seen from electricity consumption over time.	End consumer, no effect on innovation	End consumer, necessity good.	►	►►		►►►
Pesticide tax	►►	►►	►► Pesticides have a low degree of elasticity, but the charge has been sufficiently high to have had a shift in consumer behavior.	►►► The Introduction of precision application technology has increased following the implementation of the differentiated tax.	►► No leakages of significance have been identified; however, obtaining a full overview of leakages is challenged by the diverse policy mix on the agricultural sector. Positive effects from the charge are identified, as the revenue is earmarked back to the sector.	►►►	►►►	►►► Significant acceptance of the charge in amongst citizens due to societal benefits of groundwater protection. Low industry acceptance in the early configurations of the tax amongst farmers, which later quieted down.	►►►
NO_X fund (NO)	►►	►►►	►►	►►	►►	►►	►►►	►►►	►►►
Waste incineration tax (NO)	►►	►►► Adresses waste and calculated from tonnes of waste; not directly CO₂	►►	►►	►► Risk of leakage to other countries, but not necessary emission effects	►►►	►►	►	►►
Aviation tax (SE)	►►	►	►►	►►	►►	►►►	►►	►►	►
Plastic bag tax (SE)	►►►	►►	►	►►	►	►	►►►	►	►
Carbon tax on fuels (FI)	►►	► Exemption of the agriculture sector	►►	►► Medium In the transportation sector, otherwise low	►►	►	►►►	►►	►►
Beverage packaging tax (FI)	►►►	►►►		►		►►►	►►►	►►►	►►►

Some of the criteria are supporting each other. Stronger accept among consumers (voters) and the industries increases the likelihood for political alignment and thus decrease political risks (increase stability in policies). Equity and synergies with other policies could also be part in determining acceptability and political alignment. Incentivising technology development and adoption should decrease the risk of leakages since the new, more environmentally friendly technologies reduce the need for moving the activity. More precise charges strengthen the price signal, thereby amplifying the impact through price elasticity.

Other criteria are in conflict. There could be a conflict between setting a charge level that sufficiently internalises the externalities and a charge level and design that is (politically and socially) acceptable. The Norwegian government plans to increase the CO₂tax on waste incineration to the level of other non-ETS emissions in Norway but receive strong criticism from the industry. On the other hand, the Norwegian NO_X fund (and a similar system in Sweden) is considered successful, in particular due to the industry and political acceptance. The aviation tax in Sweden has also received strong resistance from the industry and will be removed. While the charge level is lower than the externalities, the signal of the charge could be stronger than the actual price increase, which could help explain the low industry (and political) acceptance.

A conflicting goal in increasing relevance is between internalising environmental costs and competitiveness. Industry acceptability could, therefore, be more relevant for green charges affecting export-oriented businesses. In our cases, this is particularly relevant for the NO_X tax (and the NO_X fund), the carbon tax and the electricity tax. Increased focus on competitiveness (e.g., the Draghi report – The future of European competitiveness) could increase the relevance of industry acceptance for green charges.