Are green cars an optimal and efficient choice for motorists? Evidence from Italy

Abstract

This study evaluates whether a motorist's choice over green cars (i.e., cars with featuring low CO2 emissions) and non-green cars (i.e., cars featuring high CO2 emissions) is efficient. To this end, we present a micro-founded model of motorist choice incorporating the impact of eco-incentives and taxation on CO2 emissions. Subsequently, we implement data envelopment analysis on a large database of new cars registered in 2019 to evaluate efficiency. The results show that the motorist's optimal choice (green car) does not coincide with the efficient choice. Moreover, motorist choice is mainly guided by the high price of green cars. On average, the efficient choice coincides with cars that end up in the dark area (they do not benefit from eco-incentives and do not pay the pollution tax), being the cheapest, the lightest, the least powerful (low Kw) and petrol fuelled. On average, these elements pertain to Italian motorists with respect to their tastes; most importantly, their budgets do not go well with the high costs of green cars.