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Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market

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  • Mathias Reynaert

Abstract

This article studies the introduction of an EU-wide emission standard on the automobile market. Using panel data from 1998 to 2011, I find that firms decreased emission ratings by 14%. Firms use technology adoption and gaming of emission tests to decrease emissions, rather than shifting the sales mix or downsizing. I find that the standard missed its emission target, and from estimating a structural model, I find that the standard was not welfare improving. The political environment in the EU shaped the design and weak enforcement and resulted in firms’ choices for abatement by technology adoption and gaming.

Suggested Citation

  • Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    • Handle: RePEc:oup:restud:v:88:y:2021:i:1:p:454-488.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa058
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    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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