Mattias Frumerie, Swedish Head of Delegation to United Nations Framework Convention on Climate Change (UNFCCC), has been having a dialogue with many countries including India on how to reduce carbon emissions to protect the environment. In an email interview, Frumerie shares with Outlook’s Lola Nayar how carbon taxes and stimulus can play a significant role in shaping India's green recovery.
Q) How effective is green taxation? What is imperative to ensure the right outcome?
Green taxation, like the Swedish carbon tax, for example, ensures that emissions are reduced in the most cost-effective way while simultaneously stimulating the development of new, green technologies and is a fundamental component of the Swedish carbon mitigation strategy. The purpose of green taxation is to make polluters pay for their emissions, to force companies that pollute to internalize their negative externalities. To ensure the right outcome, it’s imperative that the green taxes target the pollutant or the polluting behaviour and that the tax rate is sufficient to discourage practices that harm the environment.
Q) India levies considerable taxes on petroleum fuels. Is that enough to wean people to use greener fuels?
Considerable taxes on petroleum fuels is a great start, but should be complemented with other policy measures to motivate people to use greener fuels. In Sweden, we have tax exemptions for biofuels and lower taxes on electrical cars in addition to legal requirements on fuel companies to mix a certain amount of renewable fuel in fuels sold.
Q) How does the system work in Nordic countries and what has been the outcome?
All Nordic countries have green taxation to curb climate change. Sweden introduced a carbon tax in 1991 that has gradually been increased to SEK 1200 per tonne of carbon dioxide emitted. Sweden’s GHG emissions have decreased by 26 % since 1990. Finland introduced its first carbon tax in 1990 that has gradually been increased to EUR 62 per tonne of carbon dioxide emitted. Finland’s GHG emissions have decreased by 26 % in 2019 compared to 1990. Denmark introduced its first carbon tax in 1992 that has gradually been increased to EUR 24 per tonne of carbon dioxide emitted. Denmark’s GHG emissions have decreased by 29% in 2018 compared to 1990. Norway introduced its first carbon tax in 1991 that has gradually been increased to EUR 48 per tonne of carbon dioxide emitted. Iceland introduced its first carbon tax in 2010 that has gradually been increased to EUR 27 per tonne of carbon dioxide emitted.
Q) How many countries are levying green taxes? Is it having the desired impact?
So far 17 countries in Europe are levying green taxes and the countries that are members in the European Union are also part of the EU Emissions Trading System. The tax rate and which emissions are covered by the taxes differ significantly between countries which results in varying degrees of success but overall, it’s fair to say that green taxes have a positive impact on the environment.
Q) Are countries including India doing enough to address continuing concerns on climate change? Are we on course to meet our commitments for sustainable development?
All countries need to do more to ensure the transition to climate neutrality. All countries must undertake more ambitious climate policies to meet our commitments for sustainable development and to keep global warming below 1.5 °C. The economic recovery from the pandemic should be sustainable to ensure that we address climate change and future pandemics.