A research group at the School of Economics has examined carbon dioxide emissions from Swedish companies during the period 1990 to 2008. In 1991, Sweden introduced one of the first countries in the world to introduce a carbon tax on carbon dioxide emissions. For more than two decades, emissions decreased. But not for the biggest emissions.

- Quite a number of companies reduced their carbon dioxide emissions. But the industries that account for about 70 to 75 percent of all carbon dioxide emissions in Sweden, where nothing happened. They may even increase their carbon dioxide emissions, says Professor Per Strömberg.

The reason was that the steel industry, after lobbying, among other things, managed to get the government to introduce exceptions.

- This tax had a ceiling so you couldn't pay more tax than a certain amount. All major emissions emitted much more, which meant that their carbon dioxide marginal tax rate was zero. So even though they had reduced their emissions, they had not paid less tax, and consequently they had no incentive to reduce their carbon emissions, says Per Strömberg.

Pay a little

According to Per Strömberg, the tax should have been designed in a different way to have become more efficient.

- The reason for setting a ceiling was because they realized that this tax would be so high for some companies such as steel and other export industries that they simply had to cut down in Sweden. A better way would have been a lower tax rate but a positive marginal tax, so that they could have had these companies left, but they had still made money on reducing their emissions, says Per Strömberg.

Today, the largest emissions in Sweden in the steel and cement industry are included in the emissions trading system. The system, which has been generously combined with various exceptions and subsidies, has meant that steel companies such as SSAB do not in principle pay anything at all for their emissions, despite the fact that the company is Sweden's single largest carbon dioxide emitter.