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The Use of Economic Instruments TemaNord 2014:549 TemaNord Ved Stranden 18 DK-1061 Copenhagen K www.norden.org The Use of Economic Instruments In Nordic Environmental Policy 2010–2013 The Use of Economic Instruments The Working Group on Environment and Economy of the Nordic Council of Ministers publishes regular reports on the use of economic instruments in Nordic environmental policy. This report is part of that series and has two parts. Part 1 presents an overview of the use of economic instruments in Nordic environmental policy, with a focus on policy changes over the period 2010–2013. Part 2 develops a framework for assessing the political possibilities of reforming environmentally harmful subsidies, and applies this framework to three cases relevant in the Nordic context. The report was prepared by Copenhagen Economics, GreenStream Network and Environice. The authors of the report are Hrafnhildur Bragadóttir, Carl von Utfall Danielsson, Roland Magnusson, Sampo Seppänen, Amanda Stefansdotter and David Sundén. TemaNord 2014:549 ISBN 978-92-893-2824-1 ISBN 978-92-893-2825-8 (EPUB) ISSN 0908-6692 TN2014549 omslag 4.indd 1 21-08-2014 10:31:03 The Use of Economic Instruments In Nordic Environmental Policy 2010–2013 Hrafnhildur Bragadóttir, Carl von Utfall Danielsson, Roland Magnusson, Sampo Seppänen, Amanda Stefansdotter and David Sundén TemaNord 2014:549 The Use of Economic Instruments In Nordic Environmental Policy 2010–2013 Hrafnhildur Bragadóttir, Carl von Utfall Danielsson, Roland Magnusson, Sampo Seppänen, Amanda Stefansdotter and David Sundén ISBN 978-92-893-2824-1 ISBN 978-92-893-2825-8 (EPUB) http://dx.doi.org/10.6027/TN2014-549 TemaNord 2014:549 ISSN 0908-6692 © Nordic Council of Ministers 2014 Layout: Hanne Lebech Cover photo: iStock fotos and Colourbox Print: Rosendahls-Schultz Grafisk Copies: 200 Printed in Denmark This publication has been published with financial support by the Nordic Council of Ministers. However, the contents of this publication do not necessarily reflect the views, policies or recom- mendations of the Nordic Council of Ministers. www.norden.org/en/publications Nordic co-operation Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involv- ing Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an im- portant role in European and international collaboration, and aims at creating a strong Nordic community in a strong Europe. Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world’s most innovative and competitive. Nordic Council of Ministers Ved Stranden 18 DK-1061 Copenhagen K Phone (+45) 3396 0200 www.norden.org Content Preface........................................................................................................................................................ 7 Executive Summary ............................................................................................................................... 9 Abstract .............................................................................................................................................. 9 Background ....................................................................................................................................... 9 Conclusions and recommendations ...................................................................................... 10 Introduction .......................................................................................................................................... 17 Background .................................................................................................................................... 17 Objectives ....................................................................................................................................... 19 Part I: Overview of Economic Instruments 2010–2013........................................................ 21 1. Summary and cross-country comparison ........................................................................... 23 1.1 Long-term goals in Nordic Climate and Energy Policy ..................................... 23 1.2 Other environmental goals ......................................................................................... 25 1.3 The EU Emissions Trading System (EU ETS)........................................................ 29 1.4 Phase III of the EU ETS ................................................................................................. 29 1.5 Inclusion of aviation in the EU ETS .......................................................................... 30 1.6 Supply and demand in Phase II and outlook for Phase III ............................... 30 2. Denmark.......................................................................................................................................... 33 2.1 Energy and air pollution .............................................................................................. 35 2.2 Water................................................................................................................................... 42 2.3 Waste .................................................................................................................................. 43 2.4 Transport ........................................................................................................................... 47 2.5 Agriculture and natural resources ........................................................................... 48 3. Finland ............................................................................................................................................. 51 3.1 Energy and air pollution .............................................................................................. 52 3.2 Water................................................................................................................................... 60 3.3 Waste .................................................................................................................................. 61 3.4 Transport ........................................................................................................................... 66 3.5 Agriculture and natural resources ........................................................................... 68 4. Iceland.............................................................................................................................................. 71 4.1 Energy and air pollution .............................................................................................. 72 4.2 Water................................................................................................................................... 76 4.3 Waste .................................................................................................................................. 76 4.4 Transport ........................................................................................................................... 78 4.5 Agriculture and natural resources ........................................................................... 80 5. Norway ............................................................................................................................................ 81 5.1 Energy and air pollution .............................................................................................. 82 5.2 Water................................................................................................................................... 90 5.3 Waste .................................................................................................................................. 91 5.4 Transport ........................................................................................................................... 95 5.5 Agriculture and natural resources ........................................................................... 99 6. Sweden .......................................................................................................................................... 101 6.1 Energy and air pollution ............................................................................................ 103 6.2 Water ................................................................................................................................ 119 6.3 Waste ................................................................................................................................ 121 6.4 Transport ........................................................................................................................ 127 6.5 Agriculture and natural resources ......................................................................... 134 Part II: Environmentally Harmful Subsidies in the Nordic Countries ........................... 137 7. What are environmental harmful subsidies and how can they be identified and categorised? .................................................................................................... 139 7.1 Introduction ................................................................................................................... 139 7.2 Defining environmentally harmful subsidies ....................................................
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