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Greening the Vehicle Fleet: Evidence from Norway’s CO2 Differentiated Registration Tax

Author

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  • Yan, Shiyu

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Eskeland, Gunnar S.

    (Dept. of Business and Management Science, Norwegian School of Economics)

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 important.

Suggested Citation

  • Yan, Shiyu & Eskeland, Gunnar S., 2016. "Greening the Vehicle Fleet: Evidence from Norway’s CO2 Differentiated Registration Tax," Discussion Papers 2016/14, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2016_014
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    File URL: https://hdl.handle.net/11250/2404233
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    Citations

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    Cited by:

    1. Davide Cerruti & Anna Alberini & Joshua Linn, 2019. "Charging Drivers by the Pound: How Does the UK Vehicle Tax System Affect CO2 Emissions?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 99-129, September.
    2. Yan, Shiyu, 2018. "The economic and environmental impacts of tax incentives for battery electric vehicles in Europe," Energy Policy, Elsevier, vol. 123(C), pages 53-63.

    More about this item

    Keywords

    CO2 intensity; new vehicle; vehicle registration tax; fuel cost; Pigovian taxation; green tax reform; greenhouse gas emission reductions;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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