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Assessment of CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece

  • Adamos Adamou
  • Sofronis Clerides
  • Theodoros Zachariadis

Vehicle taxation based on a car’s CO2 emission levels is increasingly adopted in countries around the world. This paper describes a model of oligopolistic competition in markets with differentiated products, simulating automobile demand and supply under alternative tax regimes. The objective is to perform simulations in order to evaluate policies that could shift consumer purchases towards low-CO2 cars and thus lead to the reduction of fuel use and CO2 emissions. Focusing on an analysis of the car market of Greece, we assess the environmental and economic implications of alternative carbon-based tax schemes. Our findings, which are relevant for other European countries as well, illustrate that careful policy design, supported by an appropriate model, can bring about substantial environmental benefits without losing control of economic parameters such as public finances or firm profits. In some cases vehicle taxation can have adverse (though unintended) environmental consequences.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-12.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 04-2012.

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Length: 31 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:ucy:cypeua:04-2012
Contact details of provider: Web page: http://www.econ.ucy.ac.cy

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  1. 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.
  2. Kenneth A. Small & Kurt Van Dender, 2006. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," Working Papers 050603, University of California-Irvine, Department of Economics.
  3. 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 444-79, April.
  4. Fershtman, C. & Gandal, N. & Markovich, S., 1997. "Estimating the Effect of Tax Reform in Differentiated Product Oligopolistic Markets," Papers 29-97, Tel Aviv.
  5. 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.
  6. 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.
  7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  8. Anderson, Soren & Parry, Ian & Sallee, James M. & Fischer, Carolyn, 2010. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Discussion Papers dp-10-45, Resources For the Future.
  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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