Discontinued diffusion of alternative-fueled vehicles—The case of flex-fuel vehicles in Sweden

ABSTRACT

Policymakers in many countries are facing the challenge of phasing out fossil fuels from the vehicle fleet. Until 2008, Sweden seemed to have managed a shift toward flex-fuel vehicles (FFVs), i.e. vehicles that can be driven on a combination of ethanol and gasoline. Every year, sale shares increased, reaching in 2008 almost 25% of the market. But then, the sales dropped to 5% of new sold cars in 2011. In this paper, the development of the flex-fuel market is analyzed by studying the underlying factors such as the market of FFVs and other “green vehicles,” fuel prices, national and local incentives, fueling stations, and the reporting of ethanol as a fuel in media. These factors are then analyzed through econometric analysis of a time series of share of FFVs sales in Sweden between 2002 and 2011 and descriptive statistics of municipal data of share of FFVs sales between 2005 and 2011. Findings show that fuel-efficient diesels entering the market, E85 (ethanol mixed with 15% gasoline) losing its economic advantage, and changes in the rebate structure have been the most significant factors for the decline. The effect of local incentives such as parking subsidies, fueling stations, and exemption from the congestion charging in Stockholm is harder to establish.

KEYWORDS:

• Alternative fueled vehicles
• ethanol
• flex-fuel vehicles
• media
• parking subsidies
• subsidies

Acknowledgments

The author thanks Jim Sweeney for the comments and encouragement during the work. She would also like to thank the different municipal representatives who helped provide information about parking subsidies. Mohamed-Reda Moursli and Yonas Alem are also thanked for their good discussions and suggestions for the econometric analysis. The author also thanks three anonymous reviewers for their comments and suggestions.

Funding

Funding from the Swedish Research Council Formas and the Area of Advance Transport at Chalmers as well as financial assistance for data from Precourt Energy Efficiency Centre, Stanford, is gratefully acknowledged.

Notes

¹ It should also be noted that diesel vehicles entail higher emissions of criteria pollutants.

² E85 is fuel that consist of 85% ethanol and 15% gasoline. In the winter time in Sweden the share of ethanol is reduced to 75%.

³ SEK is the Swedish Krona, the official Swedish currency.

⁴ The share of taxes of the pump price in Sweden is roughly 60%, including VAT.

⁵ In the popular press even higher numbers ranging up to 40% have circulated.

⁶ www.di.se “Slut för miljöbilspremien” 2008-09-08. Accessed 2012-10-29.

⁷ The Toyota Prius was the exception – but even this vehicle is considered small compared to the most sold vehicle model in Sweden, the Volvo V70.