Refunded emission payments and diffusion of NOx abatement technologies in Sweden

- We study diffusion of NOX abatement technologies under the Swedish system of refunded emission payments (REP).
- REP was introduced as a complement to the existing system of emission standards.
- REP had a significant effect on the adoption of post-combustion technologies.
- The effects of REP on technology diffusion have been enhanced by emission standards.
- Effects are considerably larger in counties where stringent standards are in place.

This paper studies how different NOx abatement technologies have diffused under the Swedish system of refunded emission payments (REP) and analyzes the determinants of the time to adoption. The policy, under which the charge revenues are refunded back to the regulated firms in proportion to energy output, was explicitly designed to affect investment in NOx-reducing technologies. The main finding is that REP had a significant effect on the adoption of post-combustion technologies. Moreover, we also find some indications that the effects of REP have been enhanced by the existing system of individual emission standards. In particular, the effect of REP speeding up the pace of adoption of post-combustion technologies is considerably larger in those counties where stringent standards are in place.