Disentangling sources of vehicle emissions reduction in France: 2003-2008

We analyze the evolution of CO₂ emissions of new vehicles sold in France between 2003 and 2008. We investigate in particular the effect of two policies introduced during that time: the energy label requirement, which went into effect in the end of 2005, and a feebate based on CO₂ emissions of new vehicles in 2008. We estimate a flexible model of demand for automobiles that incorporates consumers' heterogeneity and valuation of vehicle CO₂ emissions. Our results show that there has been a shift in preferences towards low-emitting cars. Moreover, the timing of these changes is consistent with the introduction of the two policies. This suggests that the feebate had a crowding-in effect in addition to its price effect. Overall, the change in preferences accounts for 40% of the overall decrease in average CO₂ emissions of new cars in the period.