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Fiscal Policy and CO2 Emissions of New Passenger Cars in the EU

Author

Listed:
  • Reyer Gerlagh

    (Tilburg University, Netherlands)

  • Inge van den Bijgaart

    (Tilburg University, Netherlands)

  • Hans Nijland

    (PBL Netherlands Environmental Assessment Agency, Netherlands)

  • Thomas Michielsen

    (CPB Netherlands Bureau for Economic Policy Analysis, Netherlands)

Abstract

T o what extent have national fiscal policies contributed to the decarbonisation of newly sold passenger cars? We construct a simple model that generates predictions regarding the effect of fiscal policies on average CO2 emissions of new cars, and then test the model empirically. Our empirical strategy combines a diverse series of data. First, we use a large database of vehicle-specific taxes in 15 EU countries over 2001-2010 to construct a measure for the vehicle registration and annual road tax levels, and separately, for the CO2 sensitivity of these taxes. We find that for many countries the fiscal policies have become more sensitive to CO2 emissions of new cars. We then use these constructed measures to estimate the effect of fiscal policies on the CO2 emissions of the new car fleet. The increased CO2-sensitivity of registration taxes have reduced the CO2 emission intensity of the average new car by 1,3 percent, partly through an induced increase of the share of diesel-fuelled cars by 6,5 percentage points. Higher fuel taxes lead to the purchase of more fuel efficient cars, but higher annual road taxes have no or an adverse effect.

Suggested Citation

  • Reyer Gerlagh & Inge van den Bijgaart & Hans Nijland & Thomas Michielsen, 2015. "Fiscal Policy and CO2 Emissions of New Passenger Cars in the EU," Working Papers 2015.32, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2015.32
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    References listed on IDEAS

    as
    1. Cristian Huse & Claudio Lucinda, 2014. "The Market Impact and the Cost of Environmental Policy: Evidence from the Swedish Green Car Rebate," Economic Journal, Royal Economic Society, vol. 124(578), pages 393-419, August.
    2. Mabit, Stefan L., 2014. "Vehicle type choice under the influence of a tax reform and rising fuel prices," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 32-42.
    3. Hennessy, Hugh & Tol, Richard S.J., 2011. "The impact of tax reform on new car purchases in Ireland," Energy Policy, Elsevier, vol. 39(11), pages 7059-7067.
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    Cited by:

    1. Anna Matas Prat & Josep Lluís Raymond Bara & Jorge Andrés Domínguez Moreno, 2016. "Changes in fuel economy: An analysis of the Spanish car market," Working Papers wpdea1608, Department of Applied Economics at Universitat Autonoma of Barcelona.
    2. Alfonso Leme & Josep-Oriol Escardíbul, 2016. "The effect of a specialized versus a general upper secondary school curriculum on students’ performance and inequality. A difference-in-differences cross country country comparison," Working Papers 2016/16, Institut d'Economia de Barcelona (IEB).
    3. Ciccone, Alice, 2015. "Environmental Effects of a Vehicle Tax Reform: Empirical Evidence from Norway," Memorandum 03/2015, Oslo University, Department of Economics.

    More about this item

    Keywords

    Vehicle Registration Taxes; Fuel Taxes; CO2 Emissions;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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