Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles

48 Pages Posted: 7 Apr 2022

See all articles by Patrick Bigler

Patrick Bigler

University of Bern; University of Bern - Oeschger Centre for Climate Change Research

Doina Radulescu

University of Bern

Date Written: 2022

Abstract

We analyze welfare implications of policies promoting environmentally friendly vehicles employing rich Swiss micro-data on 23,000 newly purchased cars and their buyers. Our estimates reveal substantial income heterogeneity in price elasticity and electric vehicle (EV) adoption. While CO2 levies secure road financing revenue, emissions of the new car fleet only slightly decrease. In contrast, subsidies support EV uptake, and lead to a more pronounced emission reduction. Both instruments have redistributive implications. We compute optimal subsidy - fuel tax combinations subject to a pre-specified EV target and to securing road financing in the presence or absence of equity concerns.

Keywords: electric vehicles, mixed logit, welfare, fuel tax, subsidies, CO2 emissions

JEL Classification: C250, D120, H230, L620, Q480

Suggested Citation

Bigler, Patrick and Radulescu, Doina, Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles (2022). CESifo Working Paper No. 9645, Available at SSRN: https://ssrn.com/abstract=4070235 or http://dx.doi.org/10.2139/ssrn.4070235

Patrick Bigler (Contact Author)

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

University of Bern - Oeschger Centre for Climate Change Research

Zähringerstrasse 25
Bern, 3012
Switzerland

Doina Radulescu

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

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