Dieselization in Sweden

Abstract

In Sweden the market share of diesel cars grew from below 10 per cent in 2005 to 62 per cent in 2011 despite a closing gap between pump prices on diesel oil and gasoline, and diesel cars being less favored than ethanol and biogas cars in terms of tax cuts and other subsidies offered to “environment cars”. The most important factor behind the dieselization was probably the market entrance of a number of low-consuming models. Towards the end of the period a growing number of diesel models were able to meet the 120g CO2 threshold applicable to “environment cars” that cannot use ethanol or biogas. This helped such models increase their share of the diesel car market from zero to 41 per cent. Dieselization appears to have had only a minor effect on annual distances driven. The higher average annual mileage of diesel cars is probably to a large extent a result of a self-selection bias. However, the Swedish diesel car fleet is young, and the direct rebound effect stemming from a lower variable driving cost may show up more clearly as the fleet gets older based on the assumption that second owners are more fuel price sensitive than first owners.