Carbon Taxes in Europe

In recent years, several countries have taken measures to reduce carbon emissions using environmental regulations, emissions trading systems (ETS), and carbon taxes. In 1990, Finland was the world’s first country to introduce a carbon tax. Since then, 16 European countries have followed, implementing carbon taxes that range from less than €1 per metric ton of carbon emissions in Ukraine and Poland to over €100 in Sweden.

Sweden levies the highest carbon tax rate at €108.81 (US $119) per ton of carbon emissions, followed by Switzerland and Liechtenstein (€90.53, $99) and Finland (€62.18, $68). You’ll find the lowest carbon tax rates in Poland (€0.09, $0.10), Ukraine (€0.37, $0.40), and Estonia (€1.83, $2).

Carbon taxes can be levied on different types of greenhouse gases, such as carbon dioxide, methane, nitrous oxide, and fluorinated gases. The scope of each country’s carbon tax differs, resulting in varying shares of greenhouse gas emissions covered by the tax. For example, Spain’s carbon tax only applies to fluorinated gases, taxing only 3 percent of the country’s total greenhouse gas emissions. Norway, by contrast, recently abolished most exemptions and reduced rates, now covering over 60 percent of its emissions.

All member states of the European Union (plus Iceland, Liechtenstein, and Norway) are part of the EU Emissions Trading System (EU ETS), a market created to trade a capped number of greenhouse gas emission allowances. With the exception of Switzerland and Ukraine, all European countries that levy a carbon tax are also part of the EU ETS. (Switzerland has its own emissions trading system, which is tied to the EU ETS since January 2020.)

Several European countries are currently considering or have announced the implementation of a carbon tax or an ETS. For example, Germany will implement a national ETS for the heat and road transport sectors—both not covered by the EU ETS—in January 2021. Luxembourg plans to implement a €20 ($22) per ton of CO₂ carbon tax in 2021, and Austria has announced its intention to introduce some form of carbon pricing.

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