In 1991, Norway became one of the first countries in the world to impose a stiff tax on harmful greenhouse gas emissions. Since then, the country's emissions should have dropped. Instead, they have risen by 15%. Although the tax forced Norway's oil and gas sector to become among the greenest in the world, soaring energy prices led to a boom in offshore production, which in turn boosted overall emissions. So did drivers. Norwegians, who already pay nearly $10 a gallon, took the tax in stride, buying more cars and driving them more. And numerous industries won exemptions from the tax, carrying on unchanged.
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In 1991, Norway became one of the first countries in the world to impose a stiff tax on harmful greenhouse gas emissions. Since then, the country's emissions should have dropped. Instead, they have risen by 15%.
Although the tax forced Norway's oil and gas sector to become among the greenest in the world, soaring energy prices led to a boom in offshore production, which in turn boosted overall emissions. So did drivers. Norwegians, who already pay nearly $10 a gallon, took the tax in stride, buying more cars and driving them more. And numerous industries won exemptions from the tax, carrying on unchanged.
It wasn't supposed to be this way. By making it more expensive to pollute, carbon taxes should spur companies and individuals to clean up. Norway's sobering experience shows how difficult it is to cut emissions in the real world, where elegant theoretical solutions are complicated by economic changes, entrenched behaviors and political realities.
Europe struggled with a similar dilemma as it set up its "cap-and-trade" system to reduce greenhouse gas emissions by utilities and heavy industry. Regulators cushioned industry in the early years of the system, giving them little incentive to improve. As a result, emissions have crept up 1% a year since 2005. In the U.S., the Senate voted down cap-and-trade legislation in July, won over by arguments that the system would hurt industry and boost consumer prices. But the measure could be revived, since both presidential candidates support it.
A few countries have cut emissions without injuring their economies. Sweden and Denmark, both of which introduced a carbon tax, have reduced their greenhouse gas emissions by 14% and 8% respectively since 1990 while maintaining growth. Their emission reductions can't be attributed to the tax alone, economists say. Additional moves to encourage energy efficiency and renewable energy, which are government-subsidized, played a part.
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