The Devil and the Details of National Carbon Tax Experiments

The Sightline Institute has a useful database on when various countries started pricing carbon, what the price on carbon is, and how much of each region's GHG emissions are covered by the carbon pricing system.

A close look at the data reveals some interesting findings.

Costa Rica brought in carbon taxation during 1997 and the tax (US$1-14/ton in 2014) covers 85 percent of the country's emissions. The United Nations Framework Convention on Climate Change (UN-FCCC) database only contains four years of emissions data for this nation (1990, 1996, 2000, and 2005). Is the tax reducing emissions? Certainly not. From 1996 to 2005, Costa Rica's carbon dioxide emissions increased by more than 31 percent, with an increase of 17 percent from 2000 to 2005. We have no data since 2005, which seems problematic for a nation that claims to be concerned about climate change.

New Zealand implemented a carbon tax (US$2/ton in 2014) in 2008 which covers half of its emissions. From 2009 to 2012 (the latest year in the UN-FCCC database), carbon dioxide emissions increased slightly by a little more than 2 percent.

Norway started its carbon tax (US$33/ton in 2014) in 1991 and it -- like New Zealand -- covers 50 percent of emissions. Since 1991, Norway's carbon dioxide emissions have increased by over 32 percent. The emissions trend is increasing over the past decade as well.

Another carbon tax nation is Iceland, whose tax (US$10/ton in 2014) began in 2005 and also covers half the emissions. Since 2005, Iceland's carbon dioxide emissions are up 17 percent.

Denmark is one of the carbon tax proponents' favorite case studies. Brought into force in 1992, the Danish tax (US$31/ton in 2014) covers 45 percent of its emissions. But between 1992 and 2006, there was absolutely no reduction in Denmark's carbon dioxide emissions -- actually, there was a slight increase. Since 2006, there has been a large decease in emissions (by about one-third). Of course, the Danish economy has also contracted in real terms by 3 percent since 2006. These temporal details are generally left out of discussions on how Denmark's carbon tax supposedly allows both economic growth and a reduction in emissions to occur simultaneously. The data shows the exact opposite.

The United Kingdom started carbon pricing (US$16/ton in 2014) in 2001 with 40 percent emissions coverage. From 2001 to 2007, the UK's emissions were effectively unchanged (just a 2 percent reduction). Since 2007, carbon dioxide emissions dropped almost 13 percent. In real terms, the UK economy contracted almost one percent since 2007. Just like Denmark, once emissions started to fall, the size of the national economy became correspondingly smaller.

Ireland's carbon tax (US$28/ton in 2014) started in 2005 and covers 40 percent of emissions. From 2005 through 2008, emissions were unchanged. Once emissions started to decline in 2009, economic growth stopped cold. Emissions dropped 19 percent from 2008 to 2012, and economic growth has been negligible -- with the size of the Irish economy growing only 0.15 percent over this time frame.

Switzerland began carbon taxation (US$68/ton in 2014) in 2008 with 30 percent emissions coverage. Since 2008, emissions have fallen slightly (a little less than 5 percent), and economic growth has been concomitantly anemic (just 3.7 percent total from 2008 to 2012).

Finland's carbon tax (US$48/ton in 2014) dates back to 1990. From 1990 to 2011, carbon dioxide emissions were entirely unchanged -- there was an increase from 1990 through the mid-2000s, and subsequent decline that balanced out the initial rise. Between 2011 and 2012, emissions declined 10 percent. The economy contracted 1.5 percent. From 2007 to 2012, Finland's emissions dropped 23 percent; its national economy shrunk almost 4 percent in real terms.

France's carbon tax (US$10/ton in 2014) started in 2005 and covers 35 percent of emissions. French emissions declined 13 percent since 2005 and the economy grew 6 percent, but 6 percent growth over 8 years is hardly satisfactory.

Sweden's carbon tax (US$168/ton in 2014) began in 1991 and covers a quarter of emissions. From 1991 to 2003, emissions declined just 0.9 percent. Since 2003, emissions have declined 19 percent and there has been only 19 percent real economic growth during this decade -- which is a low annualized growth rate over 10 years.

With no exceptions, we see that carbon taxes -- across a wide range of prices, national economy compositions, and emissions coverage -- either fail to substantially lower emissions, or lower post-carbon tax emissions only correlate with economic contraction or sustained extremely low growth rates. The notion that we can have reasonable rates of economic growth coupled to substantial carbon dioxide emissions appears is not supported by any national example to date.

The Sightline Institute has a useful database on when various countries started pricing carbon, what the price on carbon is, and how much of each region's GHG emissions are covered by the carbon pricing system.

A close look at the data reveals some interesting findings.

Costa Rica brought in carbon taxation during 1997 and the tax (US$1-14/ton in 2014) covers 85 percent of the country's emissions. The United Nations Framework Convention on Climate Change (UN-FCCC) database only contains four years of emissions data for this nation (1990, 1996, 2000, and 2005). Is the tax reducing emissions? Certainly not. From 1996 to 2005, Costa Rica's carbon dioxide emissions increased by more than 31 percent, with an increase of 17 percent from 2000 to 2005. We have no data since 2005, which seems problematic for a nation that claims to be concerned about climate change.

New Zealand implemented a carbon tax (US$2/ton in 2014) in 2008 which covers half of its emissions. From 2009 to 2012 (the latest year in the UN-FCCC database), carbon dioxide emissions increased slightly by a little more than 2 percent.

Norway started its carbon tax (US$33/ton in 2014) in 1991 and it -- like New Zealand -- covers 50 percent of emissions. Since 1991, Norway's carbon dioxide emissions have increased by over 32 percent. The emissions trend is increasing over the past decade as well.

Another carbon tax nation is Iceland, whose tax (US$10/ton in 2014) began in 2005 and also covers half the emissions. Since 2005, Iceland's carbon dioxide emissions are up 17 percent.

Denmark is one of the carbon tax proponents' favorite case studies. Brought into force in 1992, the Danish tax (US$31/ton in 2014) covers 45 percent of its emissions. But between 1992 and 2006, there was absolutely no reduction in Denmark's carbon dioxide emissions -- actually, there was a slight increase. Since 2006, there has been a large decease in emissions (by about one-third). Of course, the Danish economy has also contracted in real terms by 3 percent since 2006. These temporal details are generally left out of discussions on how Denmark's carbon tax supposedly allows both economic growth and a reduction in emissions to occur simultaneously. The data shows the exact opposite.

The United Kingdom started carbon pricing (US$16/ton in 2014) in 2001 with 40 percent emissions coverage. From 2001 to 2007, the UK's emissions were effectively unchanged (just a 2 percent reduction). Since 2007, carbon dioxide emissions dropped almost 13 percent. In real terms, the UK economy contracted almost one percent since 2007. Just like Denmark, once emissions started to fall, the size of the national economy became correspondingly smaller.

Ireland's carbon tax (US$28/ton in 2014) started in 2005 and covers 40 percent of emissions. From 2005 through 2008, emissions were unchanged. Once emissions started to decline in 2009, economic growth stopped cold. Emissions dropped 19 percent from 2008 to 2012, and economic growth has been negligible -- with the size of the Irish economy growing only 0.15 percent over this time frame.

Switzerland began carbon taxation (US$68/ton in 2014) in 2008 with 30 percent emissions coverage. Since 2008, emissions have fallen slightly (a little less than 5 percent), and economic growth has been concomitantly anemic (just 3.7 percent total from 2008 to 2012).

Finland's carbon tax (US$48/ton in 2014) dates back to 1990. From 1990 to 2011, carbon dioxide emissions were entirely unchanged -- there was an increase from 1990 through the mid-2000s, and subsequent decline that balanced out the initial rise. Between 2011 and 2012, emissions declined 10 percent. The economy contracted 1.5 percent. From 2007 to 2012, Finland's emissions dropped 23 percent; its national economy shrunk almost 4 percent in real terms.

France's carbon tax (US$10/ton in 2014) started in 2005 and covers 35 percent of emissions. French emissions declined 13 percent since 2005 and the economy grew 6 percent, but 6 percent growth over 8 years is hardly satisfactory.

Sweden's carbon tax (US$168/ton in 2014) began in 1991 and covers a quarter of emissions. From 1991 to 2003, emissions declined just 0.9 percent. Since 2003, emissions have declined 19 percent and there has been only 19 percent real economic growth during this decade -- which is a low annualized growth rate over 10 years.

With no exceptions, we see that carbon taxes -- across a wide range of prices, national economy compositions, and emissions coverage -- either fail to substantially lower emissions, or lower post-carbon tax emissions only correlate with economic contraction or sustained extremely low growth rates. The notion that we can have reasonable rates of economic growth coupled to substantial carbon dioxide emissions appears is not supported by any national example to date.