The effects of fuel tax on demand for environmentally friendly cars : a fixed effects model

Abstract: The emissions of greenhouse gases have for long been a big issue for the planet and the human wellbeing. A tax on fossil fuels and emitted greenhouse gases have been introduced in Sweden, among other countries. The tax is an attempt to decrease the use of fossil fuels along with the emissions. In this paper, the tax on fossil fuels and its effects on the demand for environmentally friendly cars have be estimated. The panel data with a time period from 2001 up until 2014 have be analyzed by means of a fixed effects model. The result from the study provides suggestive evidence of a positive relationship between the fuel taxes and demand for environmentally friendly cars.