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Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy

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  • Huse, Cristian

Abstract

In the first year after the inception of the Swedish Green Car Rebate (GCR), green cars had carved over 25 percent market share in the new vehicle market, an effect of unprecedented scale if compared to recent policies incentivizing the purchase of fuel-efficient vehicles. By awarding vehicles satisfying certain emission criteria a rebate, but giving alternative fuel vehicles (AFVs, those able to run on alternative fuels) a more lenient treatment than regular fuel vehicles (RFVs, those able to run only on gasoline and diesel), the GCR created a regulatory loophole which led carmakers to increase the emissions of AFVs as compared to RFVs. This paper examines the impact of regulation on market developments comparing CO2 emissions (and fuel economy) of AFVs and RFVs. Once carmakers adjust their product lines to the policy, CO2 emissions of AFVs increased significantly as compared to those of RFVs, thus undermining the very objectives of the GCR.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48909.

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Date of creation: 2014
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Handle: RePEc:pra:mprapa:48909

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Keywords: Automobiles; Emissions; Environmental policy; Alternative fuel vehicles; Flexible-fuel vehicles; Fuel economy; Greenhouse gases; Regulation; Alternative fuels; Renewable fuels.;

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Cited by:
  1. Huse, Cristian & Lucinda, Claudio, 2013. "The Market Impact and the Cost of Environmental Policy: Evidence from the Swedish Green Car Rebate," MPRA Paper 48905, University Library of Munich, Germany.
  2. Klier, Thomas & Linn, Joshua, 2012. "Using Vehicle Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden," Discussion Papers, Resources For the Future dp-12-34, Resources For the Future.

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