Carbon Taxes and the Composition of New Passenger Car Sales in Europe

Orkhan Nadirov,Bruce Dehning,Jana Vychytilová

doi:10.3390/en13184631

Orkhan Nadirov, Bruce Dehning + Show 1 more

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https://doi.org/10.3390/en13184631

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Abstract

This paper examines the effectiveness of implementing carbon taxes to reduce carbon dioxide emissions from transport. Using the system Generalized Method of Moments estimator, we utilize cross-country analysis for the first time to study the impact of carbon taxes on the composition of petrol versus diesel passenger cars sold in 17 countries over the period 2013–2017. The results suggest that increasing carbon taxes affects consumer behavior, causing a significant shift from petrol to diesel fuel vehicles, controlling for factors such as the price of passenger cars, fuel price, interest rates, income level, population density, inflation, and vehicle stock.

Highlights

Climate change is widely considered one of the most important economic and political challenges of our times
Even though the EU ETS has been in place for over a decade, “transport fuels in the EU are not included in the ETS” [5]
Research on the determinants of car purchases has mainly revolved around the various socioeconomic factors while ignoring the role of carbon taxes at the cross-country level

Summary

Introduction

Climate change is widely considered one of the most important economic and political challenges of our times. The EU has called for a significant reduction in world greenhouse gas emissions, aiming to limit the increase in average temperature to less than 2 ◦ C. This goal was approved and agreed to by the international community. In 2005, the EU set-up the world’s first emissions trading system (EU ETS) to combat climate change by reducing greenhouse gas emissions in a cost-effective way. The biggest scheme to date, it has substantially affected the ongoing global climate policy debate, carbon-emitting practices, and attracted enormous attention in the literature (for the recently examined effect of the EU ETS on the economy, see [3]; on stock returns in Germany and UK, see [4]). Even though the EU ETS has been in place for over a decade, “transport fuels in the EU are not included in the ETS” [5]

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