Economic Instruments in Environmental Policy : A report by the Swedish Environmental Protection Agency and the Swedish Energy Agency

This report reviews existing economic instruments in the environmental field in Sweden. Evaluations of the various economic instruments have been summarised. Particular emphasis has been given to four of the16 environmental objectives in Swedish environmental policy and protection. These are Reduced Climate Impact, A Non-Toxic Environment, Sustainable Forests and Zero Eutrophication. A problem common to these objectives is that they are considered to be very difficult to achieve within the stated deadline. The analysis made is also linked to the three action strategies: (i) More efficient energy use and transport; (ii) Non-toxic and resource-efficient cyclical systems; and (iii) Management of land, water and the built environment. Our approach is based on the long-term socio-economically efficient use of instruments to achieve environmental objectives. Since only a few evaluations include socio-economic evaluation methods, we have defined three criteria for determining whether a given instrument is an effective long-term aid to achievement of the environmental objectives. Market-based systems, i.e. the electricity certificate scheme and the EU emissions trading scheme, are not described separately; they are described to the extent the systems act in conjunction with other economic instruments. The economic instruments covered can be divided into groups: taxes, charges, tax relief and grants. This project has been carried out over a fairly short space of time, and we have therefore been unable to fully review the literature. Nonetheless, our survey includes nearly two hundred evaluations. The project has been carried out by the Swedish EPA and the Swedish Energy Agency as directed by the Ministry of the Environment. There has also been consultation with the National Institute of Economic Research and the Swedish Tax Agency and other agencies responsible for environmental objectives or sectors. The study is a preliminary study in preparation for a government report on economic instruments and also forms part of the in-depth review of environmental objectives to be performed in 2008. The following people have been involved in preparation of this report: Reino Abrahamsson (Swedish EPA), Johanna Andréasson (Swedish Energy Agency), Mats Björsell (Swedish EPA), Johanna Jussila Hammes (Swedish Energy Agency), Therese Karlsson (Swedish Energy Agency), Henrik Scharin (Swedish EPA), Ulrika Lindstedt (Swedish EPA) and Pelle Magdalinski (Swedish EPA). Project leaders were Marcus Carlsson Reich, Swedish EPA and Karin Sahlin, Swedish Energy Agency. English translation by Maxwell Arding