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The price of energy efficiency in the Spanish car market

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  • Galarraga, Ibon
  • Ramos, Ana
  • Lucas, Josu
  • Labandeira, Xavier

Abstract

Due to climate change, energy dependence and other energy-related issues, most developed countries are attempting to reduce fossil-fuel use in the transport sector. Accordingly, there are several instruments that have been in place for many years, such as mandatory design standards, taxes on fuels, car purchase and ownership, and energy efficiency labels. Yet it is still not clear whether consumers value energy efficiency as a characteristic of vehicles. In this paper we use the European labelling system for light vehicles, which classifies automobiles according to their relative fuel consumption levels, as a novel, alternative indicator for energy efficiency. Moreover, we use a unique database that incorporates official commercial prices along with prices obtained through ‘mystery shopping’ at a selection of Spanish car retailers. We apply the hedonic price method to this database to estimate the price functions for vehicles and thereby obtain the marginal price of vehicles rated highly in terms of energy efficiency. Our results show that vehicles labelled A and B are sold at prices 3 to 5.9 percent higher than those with similar characteristics but lower energy-efficiency labels.

Suggested Citation

  • Galarraga, Ibon & Ramos, Ana & Lucas, Josu & Labandeira, Xavier, 2014. "The price of energy efficiency in the Spanish car market," Transport Policy, Elsevier, vol. 36(C), pages 272-282.
    • Handle: RePEc:eee:trapol:v:36:y:2014:i:c:p:272-282
    DOI: 10.1016/j.tranpol.2014.09.003
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    2. Weinrich, Ramona & Spiller, Achim, 2016. "Can a Multi-Level Label do Better than a Binary Label for Animal Welfare? A PLS-Analysis of Consumer Satisfaction," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(3), pages 1-30, August.
    3. Giuliano Rolle, 2022. "Between and within vehicle models hedonic analyses of environmental attributes: the case of the Italian used-car market," SEEDS Working Papers 0822, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Aug 2022.
    4. Svetlana Ratner & Konstantin Gomonov & Svetlana Revinova, 2023. "Public Funding for Energy Innovation and Decarbonization Goals: A Coherence Challenge," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 40-45, July.
    5. Arawomo, Damilola F. & Osigwe, Augustine C., 2016. "Nexus of fuel consumption, car features and car prices: Evidence from major institutions in Ibadan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1220-1228.
    6. Galarraga, Ibon & Kallbekken, Steffen & Silvestri, Alessandro, 2020. "Consumer purchases of energy-efficient cars: How different labelling schemes could affect consumer response to price changes," Energy Policy, Elsevier, vol. 137(C).
    7. Anna Matas & José-Luis Raymond & Andrés Domínguez, 2016. "Changes in fuel economy: An analysis of the Spanish car market," Working Papers 2016/15, Institut d'Economia de Barcelona (IEB).
    8. Galarraga, Ibon & Abadie, Luis M. & Kallbekken, Steffen, 2016. "Designing incentive schemes for promoting energy-efficient appliances: A new methodology and a case study for Spain," Energy Policy, Elsevier, vol. 90(C), pages 24-36.
    9. de Ayala, Amaia & Galarraga, Ibon & Spadaro, Joseph V., 2016. "The price of energy efficiency in the Spanish housing market," Energy Policy, Elsevier, vol. 94(C), pages 16-24.
    10. Anil Markandya & Xavier Labandeira & Ana Ramos, 2013. "Policy Instruments to Foster Energy Efficiency," Working Papers 01-2014, Economics for Energy.
    11. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    12. Haq, Gary & Weiss, Martin, 2016. "CO2 labelling of passenger cars in Europe: Status, challenges, and future prospects," Energy Policy, Elsevier, vol. 95(C), pages 324-335.

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    More about this item

    Keywords

    Spain; Transport; Energy; Efficiency; Hedonic methods;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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