To combat the ‘throwaway consumer culture’, Sweden has announced tax breaks on repairs to clothes, bicycles, fridges and washing machines. On bikes and clothes, VAT has been reduced from 25% to 12% and on white goods consumers can claim back income tax due on the person doing the work.
The incentives are intended to reduce the environmental impact of the things Swedes buy. The country has ambitious targets to reduce greenhouse gas emissions, but has found that the impact of consumer choices is actually increasing.
You can be surprised by how a small change in fees changes behaviour
The scheme is expected to cost the state some $54million in lost taxes, which will be more than outweighed by income from a new tax on harmful chemicals in white goods. Moreover, Sweden’s economy is growing strongly and the government has an $800million budget surplus.
Apolitical interviewed the man behind the scheme, 45-year-old deputy finance minister Per Bolund, who is a member of the Green party and a biologist by training. He spoke to us about nudging people towards better choices; creating jobs for skilled manual workers; and Sweden’s six-hour working day.
Will these tax breaks be big enough to change people’s habits?
I think many of us have had a bike standing around broken and we don’t fix it and then start using other modes of transportation. This will expand the number of companies giving these kinds of services, so it’ll be easier for consumers to have things repaired.
And sometimes you can be surprised by how a small change in fees can really change behaviour. We’ve seen that in the congestion charging here in Stockholm, how a fee of only 10 or 20 krona ($1-2) can really change the patterns.
And in white goods, the tax break is actually quite substantial since most of the cost of repair is actually labour, so it can really make a quite big difference.
Is part of that an increased tax on new fridges, washing machines and so on?
It’s actually a tax on chemicals. So if the appliance has harmful chemicals in the production process or incorporated in it there will be a levy, but if, on the other hand, you decrease the amount you can actually get a much lower levy, or even a zero increase. So that will give an incentive to producers to decrease the use of harmful chemicals, and we know that appliances are a major contributor to the amount of them in the everyday environment.
The idea is to make it easier for consumers to act responsibly
Does that mean you’re using ‘nudges’, that is, behavioural economics?
Yes, we’ve just increased resources to expand our knowledge and expertise of nudging. The idea is to help the private and municipal sectors use nudges to make it easier for consumers to act responsibly and reduce their environmental impact with everyday choices.
Can you give an example of a nudge you’re using?
When choosing your pension scheme, we have an opt-out alternative, a fund where you have quite high standards of environmental and social sustainability, so even if you don’t make a deliberate decision to use a green fund, you actually get a good result from the big part of the population that does not invest the time and energy to make an active choice.
Won’t it hurt the economy if people buy less?
We don’t have any anticipation that this will make people avoid buying things overall, but hopefully it will be easier for people to buy high-quality products because they know it’s affordable to have them fixed if something breaks. So it’s a lessened incentive to buy as cheap as possible and then scrap something.
We believe this will create skilled manual jobs
And we also know that repairs are more labour-intense than production, which has been largely automised, so expanding repairs could actually contribute to an expanding labour market and a decrease in unemployment. Especially because repair services often require high skills but not very high education, so we believe there’s a currently unemployed part of the labour force that could benefit.
And these jobs would be in Sweden rather than abroad.
Of course it is a boost for the local labour market because repairs are by their nature done near where you live. So hopefully this will contribute to the growth of jobs locally all over the country. Whereas large-scale manufacturing is very centralised and can only happen in a few locations around the nation and internationally.
Is the point of this plan also to cut emissions from other countries, which you can’t directly control?
Absolutely. We’ve managed quite well to decrease emissions within Sweden – by some 25% since the early 1990s – but we see that the environmental effects of consumption are actually moving in the opposite direction, they’re increasing. And since Sweden wants to be a leader in sustainable development on a global scale, we feel a responsibility to do what we can domestically to decrease the impact of consumption. And increasing the purchase of environmentally labelled products and the sustainable use of the products we buy could make a valuable contribution to that.
The sharing economy could be a game-changer
What do you think of the six-hour working day, which is being tried in Sweden?
There’s no national scheme, but municipalities and private employers have tried it, and in general found it quite beneficial for the labour force. They experience better working conditions and you can see some effects when it comes to health, you get fewer sick days. We’re doing some research into it.
How do you see shopping becoming more sustainable in future?
We see that consumers are increasingly concerned and also increasingly active, showing in practice that they want to be part of the solution. We’ve seen increases of 40% when it comes to sales of Fair Trade products, for example, and that’s a really strong statement. It’s really encouraging and I think something that is just starting.
And what I think will really change consumption patterns is the growth of the sharing economy, which has so many benefits for the individual – getting easy access to things like vehicles without the responsibility of ownership and maintenance. That could be a game-changer.
(Picture Credit: Reuters)