Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Greening the Vehicle Fleet: Evidence from Norway’s CO2 Differentiated Registration Tax
() and Gunnar S. Eskeland
Abstract: Fiscal policies are used to improve vehicle fuel
efficiency and reduce CO2 emissions in the transport sector. Years of
forceful reform in Norway may be seen as informative. From 2007, Norway has
linked its new vehicle registration tax to CO2 intensities, later adapting
it into a feebate form. We exploit a detailed dataset of new vehicle
registrations, using fixed effects and instrumental variables in our
econometric analysis. We find that the CO2 differentiated registration tax
contributes significantly to shifting purchases towards low-emitting cars.
A 1000NOK tax increase (about 120USD) is associated with a reduction of
1.13% - 1.58% in vehicle registrations, and the responsiveness in car
choice to fuel costs is of the same magnitude. The estimated effect of the
tax explains the majority (79%) of the reduction in average CO2 intensity
in the new car fleet 2006 through 2011. A point estimate of the elasticity
of the CO2 intensity with respect to the CO2 price is minus 0.06, whereas
the elasticity with respect to (resulting) car prices is about minus 0.5.
An intuitive model with ‘all’ car types losing demand to low-emitting types
applies fairly well: low-emitting segments gain in share and do not get CO2
leaner, while high-emitting segments lose in share and become CO2 leaner.
Moves between nine segments and within those segments are equally
Keywords: CO2 intensity; new vehicle; vehicle registration tax; fuel cost; Pigovian taxation; green tax reform; greenhouse gas emission reductions; (follow links to similar papers)
JEL-Codes: C12; H23; Q00; Q50; (follow links to similar papers)
37 pages, August 31, 2016
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