Economic Instruments for Air Pollution Control in Sweden

Abstract

In recent years, traditional forms of regulation have been combined with economic instruments in Swedish air pollution control policy. Major economic incentives are provided by the sulfur tax, the nitrogen oxides charge, and the environmental classification of diesel fuels. Both economic instruments and administrative regulations have played a part in reducing emissions, but the new economic instruments must be considered to have been the major driving force behind the reductions. The average sulfur content of heavy fuel oil has decreased to approximately 0.4% while that of almost all gas oil is now less than 0.1%. Total nitrogen oxides emissions from boilers liable to the nitrogen oxides charge have decreased by about 40%. The tax on diesel fuels is differentiated to stimulate the use of environmentally better grades of fuel, which are taxed at a lower rate than the standard grade. As a result, diesel fuels with better specifications than the standard grade have captured a large fraction — about 75% — of diesel sales in only a few years.