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Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications

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  • Bénédicte Meurisse
  • Maxime Le Roy

Abstract

This paper investigates household behaviour with regard to vehicle fuel efficiency. We propose to approach the Willingness to Pay (WTP) for better fuel efficiency through the Hicksian compensating variation in income. Specifically, we distinguish the Willingness to Pay or to Accept (WTA) buying a more fuel-efficient car from the theoretical WTP for a reduction in fuel consumption without changing one’s car. Then by assuming that the household has to replace its car, we estimate a WTP for the cleanest car. We also analyse what effect a fuel tax and/or a feebate scheme (e.g. a bonus-malus scheme) have on the WTP for the cleanest car and on the driven mileage. We find that the WTP for the cleanest car decreases following the implementation of a fuel tax. To the contrary, a feebate system leads to an increase in this WTP. But we also find that reducing the market price of the new vehicle (i.e. through a bonus) is not worthwhile in the light of the rebound effect. However, a fuel tax – as soon as it exceeds a certain level – is able to nullify the rebound effect.

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File URL: http://cec-repec.site11.com/RePEc/cec/wpaper/14-04-Cahier-R-2014-06-Meurisse-and-Le-Roy.pdf
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Paper provided by Chaire Economie du Climat in its series Working Papers with number 1406.

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Length: 32 pages
Date of creation: 2014
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Handle: RePEc:cec:wpaper:1406

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  1. de Haan, Peter & Mueller, Michel G. & Scholz, Roland W., 2009. "How much do incentives affect car purchase? Agent-based microsimulation of consumer choice of new cars--Part II: Forecasting effects of feebates based on energy-efficiency," Energy Policy, Elsevier, vol. 37(3), pages 1083-1094, March.
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  8. Schipper, Lee, 2011. "Automobile use, fuel economy and CO2 emissions in industrialized countries: Encouraging trends through 2008?," Transport Policy, Elsevier, vol. 18(2), pages 358-372, March.
  9. Kenneth Train, 1985. "Qualitative Choice Analysis: Theory, Econometrics, and an Application to Automobile Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200554, December.
  10. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
  11. Muthukrishnan, Subhashini, 2010. "Vehicle ownership and usage charges," Transport Policy, Elsevier, vol. 17(6), pages 398-408, November.
  12. Clerides, Sofronis & Zachariadis, Theodoros, 2008. "The effect of standards and fuel prices on automobile fuel economy: An international analysis," Energy Economics, Elsevier, vol. 30(5), pages 2657-2672, September.
  13. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
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