Abstract
AimThe primary goals of this research is (i) to derive direct and cross demand market response functions for automobile powertrains and their energy carriers and (ii) to assess how CO2 emissions from automobiles depend on vehicle and energy pricesMethodsThe market demand for automobiles with differing powertrains is studied by means of a discrete choice model. Statistically precise coefficient estimates are calculated by means of a highly disaggregate data set consisting of virtually all 1.8 million new passenger car transactions in Norway during 2002–2016. Having estimated the model, we derive market response parameters in the form of direct and cross price elasticities of demand for gasoline, diesel, ordinary hybrid, plug-in hybrid and battery electric cars.ResultsThe own-price elasticity of gasoline driven cars is estimated at −1.08, and those of diesel driven, battery electric and plug-in hybrid electric cars at –0.99, −1.27 and −1.72, respectively, as of 2016 in Norway. The cross price elasticities of demand for gasoline cars with respect to the price of diesel cars, and vice versa, are estimated at 0.64 and 0.51, while the cross price elasticities of demand for battery electric cars with respect to the prices of gasoline and diesel driven cars come out at 0.36 and 0.48, respectively. A 1 % increase in the price of liquid fuel in general is found to reduce the average type approval rate of CO2 emission from new passenger cars by an estimated 0.19%.ConclusionFiscal policy measures affecting the prices of vehicles and fuel have a considerable potential for changing the long term composition of the vehicle fleet and its energy consumption, climate footprint and general environmental impact.
Highlights
When car manufacturers, car dealers or fuel companies set prices, or when policymakers are to determine the tax level, they have an interest in knowing how the demand for the product(s) in question responds to price changes
Among the early attempts to analyse the demand for various types of automobiles we find Lave and Train [45], Manski and Sherman [46], Berkovec [2], and Berkovec and Rust [3], all of these relying on disaggregate discrete choice modeling
We provide in the Appendix a couple of scatterplots where the retail price of each vehicle model variant is plotted against the price exclusive of tax or against the calculated energy costs
Summary
Car dealers or fuel companies set prices, or when policymakers are to determine the tax level, they have an interest in knowing how the demand for the product(s) in question responds to price changes. There is a large scientific literature on the direct price elasticity of demand for gasoline and/or diesel – see, e.g., the excellent review article by Dahl [9] or the metaanalyses by Brons et al [5] and Labandeira et al [44]. Hundreds of studies have focused on measuring such elasticities for gasoline and diesel fuel consumption.”. That there is a policy interest in switching between gasoline and diesel consumption, or in substituting decarbonized energy carriers for fossil. Fridstrøm and Østli European Transport Research Review (2021) 13:3 fuel, the cross price elasticities of demand between energy carriers commands at least as much interest as the direct price elasticities. The cross price elasticity measures how much the demand for a certain product changes when the price of another product increases. A high cross price elasticity between any two products would suggest that they are close substitutes
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