Nudge: The Final Edition

by Richard H. Thaler

Sweden currently has the highest carbon price in the world, about $130 per metric ton.13 Since the tax was introduced in 1991 at about $28, and gradually increased to its current level, the country has seen an 83 percent increase in real GDP—comparable to that of other OECD member countries—and a 27 percent decrease in emissions.14 Though the tax increased gasoline prices, the response to the tax promoted significantly larger behavioral changes than would be expected under a gasoline-price increase alone.15 There is a general lesson here. If a tax is understood to be responding to a serious problem, people might respond even more than they would to the purely economic incentive. In this context, they might hear a signal that it’s good to reduce greenhouse gas emissions—and they might be willing to do that even if it’s not in their economic interest. Humans are like that. We would also underline a point in Sweden’s practice that you might have just skipped over. Since 1991, Sweden’s carbon tax has nearly quintupled.