Report highlights actions to advance green technologies in Nordic region

Economic instruments to advance green technology in the Nordic countries are far from cost-effective, according to research conducted by IVL Sweden Environmental Research Institute on behalf of the Nordic Council of Ministers.

“Shortcomings can be identified at several levels. Although there are a number of instruments to limit carbon dioxide emissions, other greenhouse gases remain unregulated”, says Flintull Annica Eriksson, senior environmental economist at IVL.

The Nordic countries have different tax rates on carbon dioxide, which complicates joint decision-making at a Nordic level. The same applies to tax rates between different sectors, where the shipping sector has previously been exempted.

So in order to increase cost-effectiveness, there are grounds for reviewing and harmonizing tax rates between all the countries, as well as removing exemptions, the report authors say. There is also a case for introducing taxes on emissions other than carbon dioxide, and in additional sectors – something the European Parliament decided to do by extending the EU ETS earlier this year.

“When tax rates vary significantly between countries, there is a risk that companies locate their production in countries with the lowest carbon tax and the cheapest labour. This results in consumers in the Nordic region consuming cheap goods with a high carbon footprint”, says Flintull Annica Eriksson.

To address this, the authors of the report propose that the Nordic countries harmonize their tax levels across the different fuel types and between sectors, for each national carbon tax. They also observe that price mechanisms are not sufficient to drive the transition from a fossil-fuel dependent society, and that other policy instruments are needed.

“The implementation of a green industrial policy requires a combination of price mechanisms, regulation and investment in innovation. This can be seen as three parallel and interacting processes, all of which are needed in the climate transition.”

Although the Nordic countries are small in an international context, they can help spread innovation in green technologies beyond their borders. In the EU there is a good chance that they can take the lead and set an example by proposing ambitious policy reforms.

“Together, the Nordic countries have the potential to scale up green value chains and thus reduce the risk of disruption in a world characterized by conflict, war and political instability. However, this requires increased Nordic co-operation at ministerial level”, says Flintull Annica Eriksson.

Download the report: Use of Economic Instruments in Nordic Environmental Policy External link, opens in new window.

For more information, please contact:
Flintull Annica Eriksson, flintull.annica.eriksson@ivl.se tel. +46 (0)10-788 67 37