A CO2 tax assures that different fossil fuels are taxed in a neutral way according to actual CO2 emissions. The Swedish experience can be summarized by increased tax levels over time and steps taken towards a more uniform national price on fossil CO2. Moreover, the CO2 tax base is only moderately elastic to price changes (particularly in the short run) when it comes to petrol and diesel implying quite stable tax revenues. On the other hand, the CO2 tax seems to have had a major impact on fuels used for heating purposes, where biofuels and other non-fossil energy sources (such as energy from waste and surplus heat from industrial processes) have significantly increased their shares.
The Swedish experience of carbon taxation is that high levels of taxation have been politically feasible thanks to being part of a general fiscal reform with reduced rates of taxes on many other items.
"Sweden’s CO2 tax and taxation reform experiences" is a chapter in Genevey, R., Pachauri, R., Tubiana, L., 2013, Reducing Inequalities: A Sustainable Development Challenge.
