Sweden and Denmark are two countries that adopted carbon taxes in the early 1990s. Surprisingly, their citizens don't find themselves living in caves with rags wrapped around their feet today.

From the Sept. 27 Toronto Star:

Scandinavia is cold enough to grow a Mats Sundin. Yet nowadays nearly everyone in the hockey hero's native Sweden keeps warm in winter without burning so much as a drop of oil.

Such are the spoils of the Nordic energy paradox, where a generation of pragmatic energy policy is putting paid to the notion that life cannot prosper on a lower-carbon diet.

For those who would have their cake and eat it, too, look to Sweden, where the raw data is to be envied: between 1990 and 2006, the country enjoyed economic growth of 44 per cent in fixed prices, even as it cut carbon emissions by 9 per cent.

Denmark's numbers show a similar decoupling of GDP from the use of fossil fuels, with 43-per-cent growth contrasting with a 14-per-cent carbon reduction in the same time frame.

The shift was driven by a complex array of policies. But at its root, experts say, was the world's first carbon tax on fossil fuels – an early version of the so-called green shift now under discussion in Canada.

"We are living proof the world should not fear a tax on carbon. Sweden has the highest carbon taxation in the world but we are not living in the Stone Age," said Per Rosenqvist, a climate expert with the Swedish Environment Ministry

"The standard of life here has improved even as emissions came down. It hasn't been easy. It takes a range of policies, not just a tax. The solutions are different in every country. And they need to be regularly readjusted, as we learn from our mistakes. But it works."

The article goes on to compare and contrast the Swedish and Danish approaches, and talks a bit about the mistakes along the way. It closes with the following:

Swedish and Danish officials alike stress that carbon taxes don't succeed in and of themselves. To achieve results, they must be paired with comprehensive incentives and subsidies that build toward the desired energy shift.

"The advantage of leading the world in some of these areas is obvious. The disadvantage is that we made some mistakes," said Odgaard.

"For example, the first of the land-based windmills were built without any procedure to gain public acceptance. They caused landscape pollution and now we are paying to pull them down and re-establish better, more efficient ones in better locations," he said.

One Danish analyst describes the carbon tax as an almost Darwinian accelerator of the adapt-or-survive dilemma that all Western economies face today.

"The West is losing the heavy industrial production anyway, to China and India and wherever, because cheap labour is the real issue," said Martin Lidegaard, chair of Concito, a Danish environmental think tank.

"So what the carbon tax has done is to force the rest of our industry to go through a process of natural selection. The companies that can deliver new technologies and efficiencies survive and thrive. The companies that cannot are old and weak. And yes, let us be honest, they die," said Lidegaard. "But that's the whole point of a carbon tax. You want to pick winners that will position your economy for the future. If you make your policy to protect everybody, nothing will change."