Would you like to supersize your car? The effect of environmental subsidies on emissions

Ilona Tsanko

No 23-033, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: I study the impact of subsidies for Plug-in hybrid vehicles (PHEV) on carbon emissions. I show that subsidizing innovations without considering consumer behavior can harm the environment. I provide descriptive evidence on charging instances of PHEV and combine it with a structural model of demand for new passenger vehicles to evaluate the market outcomes had subsidies for PHEV not been in place. I show that PHEV subsidies were used by consumers to purchase larger and heavier vehicles and that consumers of PHEV seldom charge their vehicle. Taking into account the observed consumer behavior, I find that the elimination of subsidies for PHEV would have led to a yearly reduction of 167,139 tons of carbon emissions which are equivalent to the yearly carbon emissions 52,916 households emit due to energy consumption.

Keywords: Environmental regulation; Substitution; Carbon emissions; Automobiles; Demand estimation (search for similar items in EconPapers)
JEL-codes: D12 H23 H71 Q48 Q58 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-dcm, nep-ene, nep-env and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:23033

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