The significance of road transport costs in the Swedish forest industry

Environmental and transport policies based on marginal external costs, such as a kilometre tax for heavy goods vehicles, can be constrained by the risk of industries incurring higher production costs than competitors in other countries. We estimate factor demand elasticities in the wood and the pulp and paper industries using firm level data for the 1990-2001 period on input prices and quantities. The results show that the introduction of a kilometre tax for heavy goods vehicles affects transport demand as well as other factor demands, but that the effects are less pronounced in terms of changes in output.