Effects on sectors and regions of a carbon tax increase in Sweden: analysis with an SCGE model

This paper sheds some light on the consequences of a carbon tax increase to achieve the national goal for carbon emissions. By use of a spatial computable general equilibrium model, STRAGO, the main purpose of the paper is to illustrate the effects on sectors in the economy and regions in Sweden fro...

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Bibliographic Details
Published in:The Annals of regional science 2024-08, Vol.73 (2), p.731-756
Main Authors: Almström, Peter, Anderstig, Christer, Sundberg, Marcus
Format: Article
Language:English
Subjects:
Biodiesel fuels
Biofuels
Carbon
Climate
Economics
Economics and Finance
Emissions
Emissions control
Environmental Economics
Environmental tax
Equilibrium
Expenditures
Fossil fuels
Geography
Industrial structure
Landscape/Regional and Urban Planning
Microeconomics
Petroleum
Production
Regional/Spatial Science
Regions
Special Issue Paper
Substitutes
Tax increases
Tax rates
Taxation
Welfare
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Summary:This paper sheds some light on the consequences of a carbon tax increase to achieve the national goal for carbon emissions. By use of a spatial computable general equilibrium model, STRAGO, the main purpose of the paper is to illustrate the effects on sectors in the economy and regions in Sweden from a climate scenario, by estimating expected substitution effects from a predetermined reduction in emissions. The climate scenario implies a gradual increase in the current carbon tax until the goal for the reduction in emissions has been reached. Doubling the carbon tax rate is expected to reduce the total consumption of fossil fuels by 18%, and in terms of reduced emissions and total welfare, the results are of the same order of magnitude as in previous Swedish studies. At the regional level, the effect on production is largest in Region West, as the production of petroleum and a large part of manufacturing is concentrated to this region. In terms of regional welfare, the northern regions, Upper-north in particular, lose more than central regions, which reflects differences in both industrial structure and carbon intensity, due to different transportation expenditures. The impact on welfare in northern regions is however mitigated by the substitution from fossil fuels to biofuels, as production of biofuels is concentrated to these regions.
ISSN:0570-1864
1432-0592
DOI:10.1007/s00168-024-01269-y