Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy

Huse, Cristian (2014): Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy.

Abstract

In the first year after the inception of the Swedish Green Car Rebate (GCR), green cars had carved over 25 percent market share in the new vehicle market, an effect of unprecedented scale if compared to recent policies incentivizing the purchase of fuel-efficient vehicles. By awarding vehicles satisfying certain emission criteria a rebate, but giving alternative fuel vehicles (AFVs, those able to run on alternative fuels) a more lenient treatment than regular fuel vehicles (RFVs, those able to run only on gasoline and diesel), the GCR created a regulatory loophole which led carmakers to increase the emissions of AFVs as compared to RFVs. This paper examines the impact of regulation on market developments comparing CO2 emissions (and fuel economy) of AFVs and RFVs. Once carmakers adjust their product lines to the policy, CO2 emissions of AFVs increased significantly as compared to those of RFVs, thus undermining the very objectives of the GCR.

• Item Type: MPRA Paper
• Language: English
• Keywords: Automobiles; Emissions; Environmental policy; Alternative fuel vehicles; Flexible-fuel vehicles; Fuel economy; Greenhouse gases; Regulation; Alternative fuels; Renewable fuels.
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L62 - Automobiles ; Other Transportation Equipment ; Related Parts and Equipment; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L98 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution ; Water Pollution ; Noise ; Hazardous Waste ; Solid Waste ; Recycling

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