The Impact of Emissions-Based Taxes on the Retirement of Used and Inefficient Vehicles: The Case of Switzerland

CER-ETH – Center of Economic Research at ETH Zurich, Working Paper 16/257

52 Pages Posted: 8 Sep 2016 Last revised: 22 Sep 2016

See all articles by Anna Alberini

Anna Alberini

University of Maryland - Department of Agricultural & Resource Economics

Markus Bareit

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Massimo Filippini

ETH Zürich; University of Lugano - Faculty of Economics

Adan L. Martinez-Cruz

Department of Forest Economics, SLU; CERE; ETH Zürich - Centre for Energy Policy and Economics (CEPE)

Date Written: September 20, 2016

Abstract

Many countries have adopted policies designed to reduce CO2 emissions from road vehicles. Taxes linked to the CO2 emissions rate or the fuel economy of a vehicle (which is inversely related to its CO2 emissions rate) are examples of such policies. These taxes are usually imposed on new vehicles, and previous evaluations have estimated the increases in the shares or sales of new and fuel-efficient vehicles associated with such taxes. In contrast, we ask whether taxes on new cars that penalize high emitters induce changes in the retirement of used and inefficient vehicles. We exploit natural experiment conditions in Switzerland to analyze the impact of two different “bonus”/“malus” schemes implemented at the cantonal level. In both schemes, the bonus rewards new efficient vehicles. The malus is retroactive in canton Obwalden, in the sense that it is charged on both new and existing high-emitting cars, but it is only applied prospectively to new cars in Geneva. We use a difference-in-difference design within a survival analysis setting. We find that a bonus/malus accelerates the retirement of existing high-emitting vehicles in Obwalden, shortening the expected lifetime of the three most popular make-models by 7 to 11 months. The effect is the opposite in Geneva, where we estimate that the expected lifetime of these three popular models is extended by 5 to 8 months. These findings have important implications about the desirability of bonus/malus schemes and on their design, as well as on old car scrappage programs.

Keywords: Vehicle retirement, Emissions-based taxes, bonus/malus, difference-in-difference, survival analysis, Switzerland

JEL Classification: L62, Q4, Q5

Suggested Citation

Alberini, Anna and Bareit, Markus and Filippini, Massimo and Martinez-Cruz, Adan L., The Impact of Emissions-Based Taxes on the Retirement of Used and Inefficient Vehicles: The Case of Switzerland (September 20, 2016). CER-ETH – Center of Economic Research at ETH Zurich, Working Paper 16/257, Available at SSRN: https://ssrn.com/abstract=2836019 or http://dx.doi.org/10.2139/ssrn.2836019

Anna Alberini

University of Maryland - Department of Agricultural & Resource Economics ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States
301-405-1267 (Phone)
301-314-9091 (Fax)

Markus Bareit

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Massimo Filippini

ETH Zürich ( email )

ETH-Zentrum
CH-8092 Zurich
Switzerland

University of Lugano - Faculty of Economics ( email )

Via Giuseppe Buffi 13
CH-6900 Lugano, CH-6904
Switzerland

Adan L. Martinez-Cruz (Contact Author)

Department of Forest Economics, SLU ( email )

S-901 83 Umea
Sweden

HOME PAGE: http://https://www.researchgate.net/profile/Adan_Martinez-Cruz

CERE ( email )

Almas Allé 10
Umeå, 750 07
Sweden

ETH Zürich - Centre for Energy Policy and Economics (CEPE) ( email )

8092 Zurich
Switzerland
+41 44 633 80 97 (Phone)

HOME PAGE: http://www.eepe.ethz.ch/people/madan

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