Greenwash? An analysis of the efficiency of Swedish environmental taxes

A true friend of the environment would presumably advocate instruments and environmental policies that have a genuine impact on the environment. It is reasonable for those arguing for the introduction of new environmental taxes to explain the effects of such taxes in terms of welfare and the environment, and whether an environmental tax is the most suitable instrument to address a given environmental issue. Disguising fiscal taxation with environmental arguments risks undermining confidence in the tax instrument itself as well as the policy, and does nothing for the environment.

Growing numbers of taxes have been introduced with environmental reasons being their main justification. A first step, prior to the introduction of an environmental tax, should be to determine which instrument is best suited to address a specific environmental issue. When selecting policy instruments, it should be considered whether other instruments are used to tackle the same environmental issue. Failure to do so may lead to ineffective and counterproductive regulatory duplication. The aim of an environmental tax is to increase the environmental sensitivity of the tax system in those cases it is justified for environmental reasons.

Svenskt Näringsliv commissioned Runar Brännlund, Professor in national economics, to produce a report on current instruments in environmental policy, primarily in terms of their efficiency. The project has included a review of excise duties that have been introduced with environmental arguments. Our hope is that this report will contribute to a discussion about the choice of environmental instruments, so that environmental taxes are used when it is appropriate to do so. Our environment and our welfare are too important for decisions to be taken in the absence of sufficient analysis regarding the suitability and efficiency of different instruments. The political discussion about environmental taxes must be more factbased and less driven by wishful thinking and political symbolism.