The environmental effect of green taxation: The case of the French bonus/malus

A feebate on the purchase of new cars, the Bonus/Malus, was introduced in France in 2008. Less polluting cars benefited from a price reduction of up to 1,000 euro, whereas the most polluting ones were subject to a taxation of 2,600 euro. We estimate the impact of this policy on carbon dioxide emissions in the short and long run. If the shift towards the classes benefiting from rebates is considerable, we estimate the environmental impact of the policy to be negative. While feebates may be efficient tools for reducing CO₂ emissions, they should thus be designed carefully to achieve their primary goal.