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Trade-offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece

Author

Listed:
  • Adamos Adamou

    (Department of Economics, University of Cyprus, Cyprus)

  • Sofronis Clerides

    (Department of Economics, University of Cyprus, Cyprus; Centre for Economic Policy Research, UK)

  • Theodoros Zachariadis

    () (Department of Environmental Science and Technology, Cyprus University of Technology, Cyprus)

Abstract

We estimate demand for automobiles in Greece using a discrete choice model of product differentiation and use the model to evaluate carbon-based tax schemes that could shift consumer purchases towards low-CO2 cars and thus lead to the reduction of fuel use and CO2 emissions. We find that careful policy design, supported by appropriate modeling, can bring about substantial environmental benefits without losing control of economic parameters such as public finances or firm profits. This finding comes in contrast to the results of recent vehicle tax reforms in European countries, which turned out to be more costly than initially expected. Our analysis indicates that, especially in countries with already heavy vehicle taxation, improper implementation of carbon-based taxes can have adverse unintended environmental consequences.

Suggested Citation

  • Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Trade-offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece," Working Paper series 33_12, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:33_12
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    References listed on IDEAS

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    1. Fershtman, C. & Gandal, N. & Markovich, S., 1997. "Estimating the Effect of Tax Reform in Differentiated Product Oligopolistic Markets," Papers 29-97, Tel Aviv.
    2. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    3. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.
    4. Kunert, Uwe & Kuhfeld, Hartmut, 2007. "The diverse structures of passenger car taxation in Europe and the EU Commissions proposal for reform," Transport Policy, Elsevier, vol. 14(4), pages 306-316, July.
    5. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April.
    6. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    8. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    9. Rogan, Fionn & Dennehy, Emer & Daly, Hannah & Howley, Martin & Ó Gallachóir, Brian P., 2011. "Impacts of an emission based private car taxation policy - First year ex-post analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 583-597, August.
    10. Fischer, Carolyn, 2008. "Comparing flexibility mechanisms for fuel economy standards," Energy Policy, Elsevier, vol. 36(8), pages 3106-3114, August.
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    Keywords

    automobile market; carbon taxation; emissions; feebates;

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