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The Economics of Fleet-Wide Emission Targets and Pooling in the EU Car Market

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  • Markus Dertwinkel-Kalt
  • Christian Wey

Abstract

To support the green transition in the automotive sector, the EU has introduced CO2 emission performance standards, also known as the excess emissions premium (EEP) regulation, which will tighten until 2035. Manufacturers exceeding their average fleet emission targets must pay a penalty. The regulation also allows pooling of fleets, enabling manufacturers to combine fleets. We analyze how this affects market outcomes. The EEP creates a positive externality of electric on conventional cars. Pooling eases compliance but may weaken competition among existing market players, while simultaneously encouraging the entry of electric-only manufacturers into the EU.

Suggested Citation

  • Markus Dertwinkel-Kalt & Christian Wey, 2025. "The Economics of Fleet-Wide Emission Targets and Pooling in the EU Car Market," CESifo Working Paper Series 11762, CESifo.
    • Handle: RePEc:ces:ceswps:_11762
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    Keywords

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    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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