FEEM working papers "Note di lavoro" series
2011 .096

Designing Carbon Taxation Schemes for Automobiles: A Simulation Exercise for Germany


Authors: Adamos Adamou, Sofronis Clerides, Theodoros Zachariadis
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: CO2 emissions, German Automobile Market, Feebates, Carbon Taxation
JEL n.: Q5, Q53, Q58

Abstract

Vehicle taxation based on CO2 emissions is increasingly being adopted worldwide in order to shift consumer purchases to low-carbon cars, yet little is known about the effectiveness and overall economic impact of these schemes. We focus on feebate schemes, which impose a fee on high-carbon vehicles and give a rebate to purchasers of low-carbon automobiles.  e estimate a discrete choice model of demand for automobiles in Germany and simulate the impact of alternative feebate schemes on emissions, consumer welfare, public revenues and firm profits. The analysis shows that a well-designed scheme can lead to emission reductions without reducing overall welfare.

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