A key role for economic instruments in Nordic environmental policies
![Decoupling environmental pressures and economic growth](/sites/default/files/styles/content_size_800/public/images/Decoupling%2520environmental%2520pressures%2520and%2520economic%2520growth738705.jpeg?itok=qyEsGZ_3)
by Fran Weaver
Carefully targeted measures make it possible to combine environmental improvements with economic growth by creating opportunities for clean-tech businesses. Between 1990 and 2011 the Nordic region’s carbon dioxide emissions from domestic sources declined by 9% while total GDP rose by 55%.
Economic instruments are designed to correct market failures by adjusting the prices of goods and services so that they also reflect non-monetary costs such as environmental impacts, according to the principle that “the polluter pays”. The Nordic Countries widely apply all the main kinds of economic instruments, including “carrots” such as subsidies and “sticks” like targeted taxes, as well as emissions trading to reduce the cost of curbing emissions.
Especially when it comes to mitigating climate change, economic instruments can encourage and complement technological developments and programmes that promote energy efficiency and renewable energy, by changing the ways people use energy, goods and services.
Forerunners in carbon taxation
The Nordic Countries have particularly pioneered carbon taxes since the early 1990s, giving energy users incentives to improve efficiency and switch to low-carbon or renewable energy sources. Taxation levels on energy and especially on fossil fuels are generally considerably higher in the Nordic Countries than elsewhere in Europe. Norway, Sweden and Denmark also impose taxes and fees on emissions of sulphur dioxide and nitrogen oxides.
Carefully targeted measures make it possible to combine environmental improvements with economic growth by creating opportunities for clean-tech businesses. Between 1990 and 2011 the Nordic region’s carbon dioxide emissions from domestic sources declined by 9% while total GDP rose by 55%.