Determinants to decreasing CO2 emissions in the Swedish residential sector: An empirical analysis of the policy instruments

Sammanfattning: In the light of increasing awareness of households' energy-related behaviour and their response to environmental policies, it is important to analyze those instruments that have achieved their objective to promote proenvironmental behaviour. Carbon dioxide (CO2) emissions from the Swedish residential sector have decreased heavily since the 1990s, mainly due to households replacing their oil fired-boiler for an alternative heating system. With a panel data set on the actual number of oil-fired boilers in Swedish detached houses at district level from 1998 to 2012, this paper presents empirical evidence on the conversion decision of the households. Possible explanatory factors to the rapid conversion rate include increasing price of heating oil and specific policies targeted at fossil based heating such as a CO2 tax, an information campaign and a conversion subsidy. The purpose of this paper is to study if these factors have a significant impact on the stock of oil-fired boilers in Sweden. The analysis applies a fixed effect panel data model and the results indicate that a higher oil price including the CO2 tax, both alone and in interaction with its substitution price, and the information instrument have a significant negative effect on the number of boilers in use, while the subsidy does not. Following the results we will discuss the policy implications, in Sweden and beyond.