Driving innovation? Carbon tax effects in the Swedish transport sector

Nils aus dem Moore, Johannes Brehm and Henri Gruhl

Journal of Public Economics, 2025, vol. 248, issue C

Abstract: Does a carbon tax stimulate low-carbon innovation in the transport sector? We exploit an environmental tax reform in Sweden that introduced both a carbon and a value-added tax on transport fuels. Synthetic control estimates consistently find that the tax reform caused large and significant increases in low-carbon patents. We provide suggestive evidence that the carbon tax drives the effect while fuel price changes with comparable magnitude did not significantly affect low-carbon innovation. Our findings suggest that salient carbon prices may foster low-carbon innovation more effectively than fuel price elasticity estimates suggest.

Keywords: Carbon tax; Low-carbon innovation; Technological change; Synthetic control; Salience (search for similar items in EconPapers)
JEL-codes: H23 L91 Q54 Q55 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:248:y:2025:i:c:s0047272725001422

DOI: 10.1016/j.jpubeco.2025.105444

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