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Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy

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  • Huse, Cristian

Abstract

In the first year after the inception of the Swedish Green Car Rebate (GCR), green cars had carved over 25 percent market share in the new vehicle market, an effect of unprecedented scale if compared to recent policies incentivizing the purchase of fuel-efficient vehicles. By awarding vehicles satisfying certain emission criteria a rebate, but giving alternative fuel vehicles (AFVs, those able to run on alternative fuels) a more lenient treatment than regular fuel vehicles (RFVs, those able to run only on gasoline and diesel), the GCR created a regulatory loophole which led carmakers to increase the emissions of AFVs as compared to RFVs. This paper examines the impact of regulation on market developments comparing CO2 emissions (and fuel economy) of AFVs and RFVs. Once carmakers adjust their product lines to the policy, CO2 emissions of AFVs increased significantly as compared to those of RFVs, thus undermining the very objectives of the GCR.

Suggested Citation

  • Huse, Cristian, 2014. "Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy," MPRA Paper 48909, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:48909
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    References listed on IDEAS

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    Cited by:

    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. Isis Durrmeyer, 2022. "Winners and Losers: the Distributional Effects of the French Feebate on the Automobile Market," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1414-1448.
    3. Bruno De Borger & Stef Proost, 2015. "Tax and regulatory policies for European Transport – getting there, but in the slow lane," Working Papers of Department of Economics, Leuven 497597, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    4. Thomas H. Klier & Joshua Linn, 2012. "Using vehicle taxes to reduce carbon dioxide emissions rates of new passenger vehicles: evidence from France, Germany, and Sweden," Working Paper Series WP-2012-09, Federal Reserve Bank of Chicago.
    5. Cristian Huse & Nikita Koptyug, 2017. "Bailing on the Car That Was Not Bailed Out: Bounding Consumer Reactions to Financial Distress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 337-374, June.
    6. Shanjun Li & Yiyi Zhou, 2015. "Dynamics of Technology Adoption and Critical Mass: The Case of U.S. Electric Vehicle Market," Working Papers 15-10, NET Institute.
    7. Thomas Klier & Joshua Linn, 2015. "Using Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 212-242, February.

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    More about this item

    Keywords

    Automobiles; Emissions; Environmental policy; Alternative fuel vehicles; Flexible-fuel vehicles; Fuel economy; Greenhouse gases; Regulation; Alternative fuels; Renewable fuels.;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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