DOI: https://doi.org/10.71734/DP-2026‑3

Could higher fuel prices lead to employees working from home more often? As carbon pricing rises, policymakers hope price signals will curb commuting and emissions. We show that fuel prices do modestly increase remote working, but the overall carbon savings through this channel are limited.

Introduction

We examine whether local fuel prices affect employees’ remote working behavior in Germany and, in turn, whether price-induced remote working contributes meaningfully to fuel and carbon emission reductions. The question matters because transport is a major source of greenhouse gases and remote working is often touted as a low-carbon substitute for commuting. Yet, household-level price elasticities are typically small, and remote working depends on occupational and regional constraints. We leverage new micro-linked data to identify causal effects and quantify what rising carbon prices can – and cannot – achieve via shifts in working-from-home.

Main Arguments

Our central argument is twofold. First, remote working can respond to fuel price incentives, but the response is constrained by job task feasibility, employer practices, alternative transport options, and the broader social and institutional context. Second, even if carbon pricing raises fuel costs substantially, the incremental increase in remote working – and the associated indirect fuel savings – will be modest compared to the direct price effects on driving and vehicle efficiency.

Theoretically, we expect heterogeneous responses. Remote work is more feasible in high-skilled, white-collar jobs, and fuel price signals matter more where car commuting dominates and alternatives are scarce – namely rural regions. In urban agglomerations with dense public transport, employees can substitute modes rather than change work location, dampening the telework response to fuel prices.

Methodology

We combine panel data from the German Family Panel (pairfam) with monthly, micro-geocoded fuel prices (Super E5 and Diesel) from the Market Transparency Unit for Fuels. For each respondent, we average the month’s prices at the five (ten) nearest gas stations. Remote working frequency is constructed as days per month (0–20), mapped from survey categories.

To identify causal effects, we estimate fixed-effects instrumental variable models. Individual fixed effects control for time-invariant traits (e.g., education, occupation, preferences for telework), while the instrument – global Brent crude oil prices interacted with local pass-through – captures exogenous retail fuel price variation. We adjust for time-varying factors (employment type, family situation) and exclude movers to focus on short-run choices conditional on commuting costs. Robustness checks include separate fuel types, alternative station averaging, pre-pandemic placebo periods (yielding null effects), and a difference-in-differences IV design across price-change quartiles. Weak-instrument tests confirm instrument strength.

Key Findings

We find that higher local fuel prices lead to more remote working, but the effect is moderate in magnitude and concentrated in specific groups and places:

Baseline elasticity: A €1 per liter increase in local fuel prices is associated with 1.298 additional remote working days per month on average.

Regional heterogeneity: The effect is negligible in urban agglomerations but present in rural regions, where the same €1/l rise yields 1.577 extra days per month. This aligns with higher car-use shares and longer commutes outside cities; any attenuation from non-car commuters is small (upper bound roughly 7–13 %).

Occupational heterogeneity: High-skilled workers increase remote working by 1.746 days per month per €1/l, while effects for intermediate/low-skilled workers are statistically insignificant, reflecting differences in task teleworkability.

We then simulate the implications of carbon price scenarios – 85, 177, and 300 €/tCO₂ – translated into fuel price increases. Even ambitious pricing produces modest changes in remote working: at 85 €/tCO₂, we predict about 0.2 additional remote days per month; at 300 €/tCO₂, roughly 1.0 additional day. This pales in comparison to the COVID-19 shift, when monthly remote working jumped from 2.2 days (2019) to 5.6 days (2020), underscoring the outsized role of social norms and institutional arrangements.

Finally, we quantify the indirect emission savings via increased remote working relative to the direct price effects on fuel consumption. Using a central estimate of the direct fuel price elasticity (− 0.309) and literature-based elasticities for remote work’s impact on mobility, a carbon price of 177 €/tCO₂ reduces fuel use by 8.53 % in total: 7.47 % from direct price effects and 1.06 percentage points from remote work (about 14 % of the total). Aggregated to the national level, this scenario reduces total emissions by 1.24 %, with the indirect telework contribution adding only 0.08 percentage points beyond the direct effect. Distributionally, white-collar workers and rural residents exhibit somewhat larger total reductions; the tax revenue shares across groups, however, remain broadly similar as carbon prices rise.

Conclusion

Our evidence shows that employees do respond to fuel prices by working from home more often, but the effect is modest and highly contingent on occupational teleworkability and regional transport contexts. Even under ambitious carbon pricing, the incremental increase in remote working – and its indirect contribution to fuel and emission reductions – is small compared with the direct behavioral and efficiency responses to higher prices.

Policy implications follow directly. First, while carbon pricing is effective at reducing fuel use, whereas remote working as a demand-side lever will only contribute additional savings an order of magnitude smaller. To amplify impacts, complementary measures – such as improving digital infrastructure, updating workplace norms, and enabling hybrid arrangements – may help where tasks allow. Second, attention to equity is needed: lower-skilled workers have fewer remote options and may bear higher commuting costs. Targeted support, mobility alternatives in rural areas, or revenue recycling can mitigate regressive burdens. Future work should explore long-run adjustments – job location, residential moves, and employer policies – which may unlock larger behavioral shifts than short-run price signals alone.

Schmiedeberg, C., D. Schober (2026), Do local fuel prices affect remote working behaviors and carbon emission savings? Evidence from German panel data, Bundesbank Discussion Paper, No 03/2026