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Greg points us towards a great article in The Guardian on Sweden's experience with a carbon:
Between 1990 and 2006 Sweden cut its carbon emissions by 9%, largely exceeding the target set by the Kyoto Protocol, while enjoying economic growth of 44% in fixed prices.Under Kyoto, Sweden was even told it could increase its emissions by 4% given the progress it had already made. But "this was not considered ambitious enough," explains Emma Lindberg, a climate change expert at the Swedish Society for Nature Conservation."So parliament decided to cut emissions by another 4% [below 1990 levels]. The mindset was 'we need to do what's good for the environment because it's good for Sweden and its economy'."The main reason for this success, say experts, is the introduction of a carbon tax in 1991. Swedes today pay an extra 2.34 kronor (20p) per litre when they fill the tank (although many key industries receive tax relief or are exempted). "Our carbon emissions would have been 20% higher without the carbon tax," says the Swedish environment minister, Andreas Carlgren.Particularly worth noting is that Sweden slashed emissions while maintaining robust economic growth. So rather than suppressing economic development, the carbon tax redirected it. The article explains that energy consumption remained constant even in high growth periods when you would've expected it to skyrocket. What happened, says Thomas Johansson, an energy expert at the University of Lunnd, is that "non-energy-intensive industries, such as the service sector, grew more in Sweden, compared to energy-intensive industries, such as paper mills." When energy is cheap -- particularly when it's cheaper than its true cost because its externalities aren't factored in -- there'll be heavy investment in energy-intensive industries, which will, in turn, encourage growth and development centered around those sectors. When energy is pricier, investors will look for other opportunities, and direct their cash towards supporting less carbon-intensive projects. Point here is that the economy is a dynamic thing, and while a carbon tax will certainly harm carbon-based industries, the redirection of resources will also accelerate the growth and viability of alternatives.
