The study examined the attitudes of 4,000 households living near one of Sweden's electricity bidding zone borders towards carbon pricing. The results show that exposure to doubled electricity prices increases opposition to fuel taxes by 20 per cent.
The study also shows that higher electricity prices led many people to develop an exaggerated perception of how costly and unfair the taxes are, particularly believing them to be unjust toward lower-income households.
"Much of the opposition to carbon taxes is based on misconceptions. People tend to underestimate the environmental benefits and overestimate the cost to their own household," says Jens Ewald, a PhD candidate in Economics and the author of the study.
Electricity zones cause frustration
Sweden introduced four electricity bidding zones in 2011. Until 2022, there were no significant price differences between them. However, following Russia's invasion of Ukraine and the subsequent energy crisis in Europe, significant price disparities have emerged between southern and northern Sweden. The government has now tasked Sweden's electricity transmission system operator, Svenska kraftnät, with investigating whether the system of bidding zones should be abolished.
"People get angry about what they perceive as unfairness, which makes them more sceptical of climate policy. This doesn't mean we should abolish the electricity zones, but it does show that we need to do a better job of explaining the purpose and workings of the system," says Jens Ewald.
Sweden as a pioneer
Sweden was the first country in the world to introduce a carbon tax in 1991 and has since been a global leader. However, the 2022 election, in which several parties campaigned to lower petrol prices, marked a turning point.
"Carbon taxes often face political resistance, despite being crucial tools in climate efforts. The exemptions and tax reductions introduced in recent years represent the first clear break in this trend, meaning that the effective carbon tax has been lowered and Sweden's climate policy has been weakened," says Jens Ewald.
