Evaluation of bonus-malus systems for reducing car fleet CO2 emissions in Sweden

Early 2014, an official Swedish government investigation report (FFF-report) was released proposing a policy package to promote a Fossil Free Fleet in Sweden by 2050. One objective of this policy package is to design a bonus-malus system that pushes the Swedish fleet composition towards the EU objectives of the average CO2 emissions of 95 g/km for new cars by 2021. The proposed scenarios address cars bought by private persons as well as by companies. These scenarios differ in designs for registration tax, vehicle circulation tax, clean car premiums, company car benefits tax and fuel tax. We use the Swedish car fleet model system to predict the effects of the proposed scenarios on the Swedish car fleet composition. Also, we build a simple supply model to predict future supply. Our model results show that none of the three proposed scenarios is actually successful enough to meet the Swedish average CO2 emissions target of 95 g/km in 2020. The average CO2 emissions in two of these scenarios are actually higher than in the business as usual scenario. Relative to a business as usual scenario the number of ethanol and gas cars is reduced in the other scenarios which are negative results in terms of fossil fuel independence. Also, the bonus-malus system gives a positive net result in terms of budget effects showing that car buyers choose to pay the malus for a car with higher emissions rather than to be attracted by the bonus of a car with lower emissions.