Effectiveness of carbon tax on emission reduction in Sweden and Norway. A cross-country VAR analysis

Anienwe, Prince and Bhattarai, Keshab (2026): Effectiveness of carbon tax on emission reduction in Sweden and Norway. A cross-country VAR analysis.

Abstract

This paper examines the comparative effectiveness of carbon taxation policies in Sweden and Norway using the Vector Autoregression (VAR) methodology, spanning the period from 1995 to 2023. Employing impulse responses in VAR analysis, this study confirms the effectiveness of the carbon tax in Sweden, with significant lagged effects, but finds weaker policy transmission mechanisms in Norway, identifying systematic relationships between policy changes and environmental outcomes. This study contributes to the literature on climate policy design by comparing empirical evidence on optimal carbon pricing mechanisms across these two economies. In addition, the study shows how carbon tax design and implementation contexts critically determine policy effectiveness in temporal response patterns of emissions to carbon tax policies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Carbon tax; Emission reduction; VAR analysis; Climate policy; Cross-country comparison.
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics

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