Towards a Clean Vehicle Fleet: from Households’ Valuation of Fuel Efficiency to Policy Implications

Bénédicte Meurisse () and Maxime Le Roy ()
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Maxime Le Roy: Climate Economics Chair

No 2014.01, Policy Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: This paper investigates household behaviour with regard to vehicle fuel efficiency. We propose to approach the Willingness to Pay (WTP) for better fuel efficiency through the Hicksian compensating variation in income. Specifically, we distinguish the Willingness to Pay or to Accept (WTA) buying a more fuel-efficient car from the theoretical WTP for a reduction in fuel consumption without changing one’s car. Then by assuming that the household has to replace its car, we estimate a WTP for the cleanest car. We also analyse what effect a fuel tax and/or a feebate scheme (e.g. a bonus-malus scheme) have on the WTP for the cleanest car and on the driven mileage. We find that the WTP for the cleanest car decreases following the implementation of a fuel tax. To the contrary, a feebate system leads to an increase in this WTP. But we also find that reducing the market price of the new vehicle (i.e. through a bonus) is not worthwhile in the light of the rebound effect. However, a fuel tax – as soon as it exceeds a certain level – is able to nullify the rebound effect.

Keywords: Fuel efficiency; Willingness to pay; Fuel tax; Feebate scheme; Rebound effect (search for similar items in EconPapers)
JEL-codes: D11 Q58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-05
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http://faere.fr/pub/PolicyPapers/Meurisse_Le%20Roy_FAERE_PP2014.01.pdf First version, 2014 (application/pdf)

Related works:
Working Paper: Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications (2014)
Working Paper: Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications (2014)
Working Paper: Towards a Clean Vehicle Fleet: from Households’ Valuation of Fuel Efficiency to Policy Implications (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:ppaper:2014.01

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