From fuel taxation to efficiency standards: A wrong turn in European climate protection?

Colin Vance and Manuel Frondel

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: Using household travel diary data collected in Germany between 1997 and 2012, we employ an instrumental variable (IV) approach that enables us to consistently estimate both fuel price and efficiency elasticities at once. The aim is to gauge the relative impacts of fuel economy standards and fuel taxes on distance traveled. We find that the magnitude of the elasticity estimates are statistically indistinguishable: higher fuel prices reduce driving by the same degree as higher fuel efficiency increases driving. This finding indicates an offsetting effect of fuel efficiency standards on the effectiveness of fuel taxation, calling into question the efficacy of the European Commission's current efforts to legislate CO2 emissions limits for new cars given prevailing high fuel taxes. The ecological implications of this legislation for emissions reductions is explored through a simple numerical simulation using the econometric estimates.

JEL-codes: C36 D12 Q41 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/113171/1/VfS_2015_pid_696.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113171

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().