Using Vehicle Taxes to Reduce CO2 Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden

Presenter
Joshua Linn, Fellow, Resources for the Future

Abstract
This paper investigates recent tax reforms in France, Germany, and Sweden, which link vehicle taxes to CO2 emissions rates. In France, which adopted a CO2-based purchase tax, taxes have a large short-run and long-run effect on the average CO2 emissions rate of new vehicles. In Germany and Sweden, annual circulation taxes are linear functions of CO2 emissions rates. The German and Swedish taxes have a smaller and less robust effect on average CO2 emissions rates than the French tax. Taking advantage of the theoretical equivalence between a CO2 emissions rate standard and a CO2-based tax, we use these results to estimate the effect on manufacturers’ profits of reducing CO2 emissions rates. Focusing on France, a decrease of 5 g CO2/km (about 3 percent) reduces short-run profits by 10-50 euros per car, which is smaller than recent engineering-based estimates suggest. We find considerable heterogeneity in these costs across manufacturers.

Date
Thursday, April 19, 2012
12:00 - 1:30 p.m.

Lunch will be provided.

Location
7th Floor Conference Room
1616 P St. NW
Washington, D.C. 20036

All seminars will be in the 7th Floor Conference Room at RFF, 1616 P Street NW. Attendance is open, but involves pre-registration no later than two days prior to the event. For questions and to register to an event, please contact Khadija Hill at [email protected] (tel. 202-328-5174). Updates to our academic seminars schedule will be posted at www.rff.org/academicseminarseries.