Tax or Clean Technology? Measuring the True Effect on Carbon Emissions Mitigation for Sweden and Norway

David Bonilla, David Banister and Uberto Salgado Nieto
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David Bonilla: Instituto de Investigaciones Económicas, Universidad Nacional Autónoma de México, Circuito Mario de la Cueva, Ciudad de la Investigación en Humanidades, C.U., Ciudad de Mexico 04510, Mexico
David Banister: Transport Studies Unit, School of Geography and Environment, University of Oxford, S. Parks Rd., Oxford OX1 3QY, UK
Uberto Salgado Nieto: Instituto de Investigaciones Económicas, Universidad Nacional Autónoma de México, Circuito Mario de la Cueva, Ciudad de la Investigación en Humanidades, C.U., Ciudad de Mexico 04510, Mexico

Energies, 2022, vol. 15, issue 11, 1-24

Abstract: Studies of carbon emissions typically focus on price and tax effects or technology. We argue that the two are closely linked within an economy in disequilibrium. Our goals are twofold: (1) to examine the combined role of: low CO 2 technology, fuel taxes and CO 2 tax on taming CO 2 emissions and (2) to build a counterfactual analysis by capturing anything else that causes emissions to diverge from the trend such as renewable energy, energy laws and the state of the economy. The equilibrium correction model (EqCM) suggests that emissions have a long-term relationship with economic growth, fossil fuel use, taxes and clean power sources. Both oil and gas extraction and economic growth raise Norway’s emissions, offsetting the mitigating effect of taxes. Sweden´s carbon fuel tax elasticity is 20%, a value far above Norway´s elasticity, even though these carbon taxes were phased-in under a period of macroeconomic instability, weakening their effectiveness. The income elasticity of emissions is negative for Norway and positive for Sweden. Emission cuts require (a) de-growth, (b) a higher tax on transport fuels and (c) electrification of transport. The effects of tax, technology, economic growth and those for the pre- and post-carbon tax era differ strongly in the two nations.

Keywords: carbon tax; error correction model; energy economy model; economy wide carbon emissions; mitigation of CO 2 emissions; transport fuels (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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