The Economics of Fleet-Wide Emission Targets and Pooling in the EU Car Market

Markus Dertwinkel-Kalt and Christian Wey

No 11762, CESifo Working Paper Series from CESifo

Abstract: To support the green transition in the automotive sector, the EU has introduced CO2 emission performance standards, also known as the excess emissions premium (EEP) regulation, which will tighten until 2035. Manufacturers exceeding their average fleet emission targets must pay a penalty. The regulation also allows pooling of fleets, enabling manufacturers to combine fleets. We analyze how this affects market outcomes. The EEP creates a positive externality of electric on conventional cars. Pooling eases compliance but may weaken competition among existing market players, while simultaneously encouraging the entry of electric-only manufacturers into the EU.

Keywords: green regulation; automotive industry; excess emissions premium (search for similar items in EconPapers)
JEL-codes: D04 L11 L50 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11762

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