Energy efficiency and fiscal incentives : A stochastic frontier analysis of Swedish manufacturing sectors 2008-2020

Sammanfattning: This thesis is a case study of the Swedish manufacturing industry in which I measure how efficiently each sector uses energy (fuel and electricity) as input goods in their production processes, and how significant the impact of Sweden’s energy tax is in regard to energy efficiency. The purpose of this is to analyze energy security and preparedness for short-term demand shocks for electricity, as many ‘mega-investments’ of industrial nature are being planned in Sweden – which are predicted to require the installed capacity of Sweden’s electricity production to almost double by 2045. The Swedish energy tax on electricity and fuel are evaluated as potential policy instruments to encourage energy efficiency improvements EEI. A sector-level unbalanced panel data set over the period 2008-2020 is used, and the methodological framework used is a stochastic frontier analysis (SFA). The results show that most manufacturing sectors perform well with regard to efficiency scores for electricity and fuel consumption, particularly in the electricity case but there is still room for improvements. Conclusions are drawn that the energy tax on electricity and fuel should not be used to encourage EEI, as the results imply that the taxes might be cause for increased inefficiency.