Short-run Effects of Feebate Schemes on Car Markets and CO2 emissions A simulation analysis of the Swedish feebate scheme

Abstract

In a CO2-differentiated feebate scheme on new car purchases, the purchaser either pays a fee or receives a rebate depending on the emission performance of the car. In an effort to reduce CO2 emissions from transportation, several developed countries have implemented such policy measures. In Sweden, a feebate scheme entered in force on the 1st of July 2018. I simulate the short-run effects of the Swedish feebate scheme on new cars market shares and total CO2 emissions. Results show moderate response in car market shares, particularly in favour of electric cars and low-emission plug-in hybrids. For one vehicle cohort, the CO2 are reduced by 1.33 % in the short run. Considering the estimated tax revenue of 613 million SEK per vehicle cohort, the emission reductions could be achieved considerably more efficiently with alternative instruments such as a tax on fossil fuels.