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June 14, 2022
Sean Bray
In recent years, several countries have taken measures to reduce carbon emissions, including instituting environmental regulations, emissions trading systems (ETS), and carbon taxes. In 1990, Finland was the world’s first country to introduce a carbon tax. Since then, 19 European countries have followed, implementing carbon taxes that range from less than €1 per metric ton of carbon emissions in Poland and Ukraine to more than €100 in Sweden, Liechtenstein, and Switzerland.
Sweden levies the highest carbon tax rate at €117.30 (US $129.89) per ton of carbon emissions, followed by Switzerland and Liechtenstein (€117.27, $129.86) and Norway (€79.12, $87.61). You’ll find the lowest carbon tax rates in Poland (€0.07, $0.08), Ukraine (€0.93, $1.03), and Estonia (€2, $2.21).
Carbon taxes can be levied on different types of greenhouse gases, such as carbon dioxide, methane, nitrous oxide, and fluorinated gases. The scope of each country’s carbon tax differs, resulting in varying shares of greenhouse gas emissions covered by the tax. For example, Spain’s carbon tax only applies to fluorinated gases, taxing only 2 percent of the country’s total greenhouse gas emissions. Lichtenstein, by contrast covers more than 81 percent of its greenhouse gas emissions.
All member states of the European Union (plus Iceland, Liechtenstein, and Norway) are part of the EU Emissions Trading System (EU ETS), a market created to trade a capped number of greenhouse gas emission allowances. With the exception of Switzerland, Ukraine, and the United Kingdom, all European countries that levy a carbon tax are also part of the EU ETS. (Switzerland has its own emissions trading system, which is tied to the EU ETS since January 2020. Following Brexit, the UK implemented its own UK ETS as of January 2021.)
Several European countries are considering or have announced the implementation of a carbon tax or an ETS. For example, Austria’s carbon tax is due to start in July 2022.
Notes:
* Austria’s carbon tax is due to start in July 2022.
* Portugal ties its carbon tax rate to the previous year’s EU ETS allowances price.
The carbon tax rates were converted using the EUR-USD currency conversion rate as of April 1, 2022 (USD 1 = EUR 0.90307).
Source: The World Bank, “Carbon Pricing Dashboard,” last updated Apr. 1, 2022, https://www.carbonpricingdashboard.worldbank.org/map_data.
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A carbon tax is levied on the carbon content of fossil fuels. The term can also refer to taxing other types of greenhouse gas emissions, such as methane. A carbon tax puts a price on those emissions to encourage consumers, businesses, and governments to produce less of them.
The Tax Foundation is the nation’s leading independent tax policy nonprofit. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels. For over 80 years, our goal has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity.
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