Trade-Offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece

20 Pages Posted: 6 Mar 2012 Last revised: 21 May 2012

See all articles by Adamos Adamou

Adamos Adamou

University of Cyprus - Department of Economics

Sofronis Clerides

University of Cyprus; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Theodoros Zachariadis

Cyprus University of Technology; The Cyprus Institute

Date Written: May 2012

Abstract

We estimate demand for automobiles in Greece using a discrete choice model of product differentiation and use the model to evaluate carbon-based tax schemes that could shift consumer purchases towards low-CO2 cars and thus lead to the reduction of fuel use and CO2 emissions. We find that careful policy design, supported by appropriate modeling, can bring about substantial environmental benefits without losing control of economic parameters such as public finances or firm profits. This finding comes in contrast to the results of recent vehicle tax reforms in European countries, which turned out to be more costly than initially expected. Our analysis indicates that, especially in countries with already heavy vehicle taxation, improper implementation of carbon-based taxes can have adverse unintended environmental consequences.

Keywords: automobile market, carbon taxation, emissions, feebates

JEL Classification: L92, Q52, Q58

Suggested Citation

Adamou, Adamos and Clerides, Sofronis and Zachariadis, Theodoros and Zachariadis, Theodoros, Trade-Offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece (May 2012). Available at SSRN: https://ssrn.com/abstract=2016194 or http://dx.doi.org/10.2139/ssrn.2016194

Adamos Adamou

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia, 1678
Cyprus

HOME PAGE: http://ucy.ac.cy/dir/el/component/comprofiler/userprofile/adamos

Sofronis Clerides

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357 2289 3709 (Phone)
+357 2289 5049 (Fax)

HOME PAGE: http://sofronis.clerides.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Theodoros Zachariadis (Contact Author)

The Cyprus Institute ( email )

20, Konstantinou Kavafi
Aglantzia, 2121
Cyprus
+35722208720 (Phone)

Cyprus University of Technology ( email )

Dept. of Environmental Science & Technology
PO Box 50329
Limassol, 3603
Cyprus
+35725002304 (Phone)
+35725002667 (Fax)

HOME PAGE: http://www.cut.ac.cy/staff/t.zachariadis?languageId=1

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