Article

Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market

Mathias Reynaert

Abstract

This paper studies the introduction of an EU-wide emission standard on the automobile market. Using panel data from 1998-2011, I find that firms decreased emission ratings by 14%. Firms use technology adoption and gaming of emission tests to decrease emissions, rather than shifting the sales mix or downsizing. I find that the standard missed its emission target, and from estimating a structural model, I find that the standard was not welfare improving. The political environment in the EU shaped the design and weak enforcement and resulted in firms’ choices for abatement by technology adoption and gaming.

JEL codes

  • Q5: Environmental Economics
  • L5: Regulation and Industrial Policy

Replaces

Mathias Reynaert, Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market, 2015.

Reference

Mathias Reynaert, Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market, The Review of Economic Studies, 2021, forthcoming.

See also

Published in

The Review of Economic Studies, 2021, forthcoming