The Excess Cost of Supplementary Constraints in Climate Policy: The Case of Sweden’s Energy Intensity Target

From the perspective of climate policy, a target for energy efficiency could imply costly overlapping regulation. We estimate, using a computable general equilibrium model of the Swedish economy, the potential economic cost of attaining the national 2020 energy intensity target by means of tax policy instruments. Our analysis shows that the efforts to meet the energy intensity target will also reduce carbon dioxide emissions, but at excessive costs compared to alternative climate policy instruments. Moreover, attainment of the energy intensity target will call for policy instruments additional to those needed for fulfilling the national climate policy target. The results are sensitive to the development of the nuclear energy production as the definition of energy intensity includes conversion losses in electricity production