Greening the vehicle fleet: Norway's CO2-Differentiated registration tax

In 2007, Norway established its vehicle registration tax linked to vehicle CO2 intensities. In 2009, the tax was modified to a feebate structure but maintained its link to CO2 intensities. Using a panel dataset to exploit the quasi-experimental tax reforms, we estimate that a 1000-NOK (125-USD) tax increment reduces new vehicle sales by 1.06–1.58%. This result yields an elasticity of average CO2 intensity to CO2 price (implied by the tax) of −0.06. With a pass-through of the tax to car prices of 88%, the resulting elasticity of average CO2 intensity to average car price is −0.53. Thus, the tax significantly shifts consumers toward lower-emission vehicles. Our counterfactual simulations suggest that high-emission vehicle segments lose market shares and become less CO2 intensive, while low-emission vehicle segments gain market shares.