The Swedish Transport sector: The Effect of the Reduction Mandate Policy on GHG Emissions

Summary

This paper investigates the effect of the Reduction Mandate Policy (Reduktionsplikten) on the emissions from the Swedish transport sector. The policy mandates Diesel and Gasoline suppliers to blend in a certain percentage of biofuels into their products. The Difference-in-difference model (DID) is used and two-way fixed effects is applied to control for any unobserved effects. The results indicate that the GHG emissions have reduced significantly due to the policy being implicated. As the mandated percentage of biofuels to blend into the fuels increase over time, this reduction of emissions is anticipated to become more significant in the future. However, the central assumption for the DID model is for the treatment (Diesel and Gasoline) and control group (fuels that are unaffected by the intervention) to have parallel trends, a relationship that was not found in this model, the analysis of the result should therefore be done carefully.