Epsilon Archive for Student Projects

Abstract

This study evaluates how the Swedish taxation on gasoline and diesel has affected the demand for passenger cars driven by the different fuels. A fixed effect model has been applied on a panel dataset, with data on new registered cars for all 21 Swedish counties between the years 2006-2016. The results indicate that the taxation has been effective for altering consumers’ car choices and could thus contribute to increase the possibility of reaching desired climate goals. According to the results, an increase by 1 SEK/liter in the gasoline tax (which has been slightly higher than the diesel tax) would reduce the demand for gasoline passenger cars by approximately 29% in an average year. The regression for diesel cars revealed a slightly lower, but still extensive decrease in the car purchases, by a reduction of almost 24%. Another finding from the study was that the demand for gasoline and diesel cars seems to differ between the Swedish counties. Hence, a more profound investigation if additional measures should be induced in spatial counties in order to reduce the carbon footprint could be beneficial. Lastly the study revealed that the vehicle taxation also might be a useful tool for affecting consumers’ car preferences and influencing the market in a desired direction.