Gasoline, diesel, and climate policy implications - Insights from the recent evolution of new car sales in Germany

Abstract

With the aid of detailed automobile sales data this paper looks into changes in car attributes and CO2 emissions in Germany in the years 1998−2008, both at aggregate level and within individual car segments. New car CO2 emissions have not decreased at the expected levels because of negligible downsizing and increasing power of diesel cars. Interestingly, today there are relatively more models available with higher-than-average emission levels than in the late 1990s. We further constructed matched pairs of gasoline and diesel models in order to explore how their power and emissions ratio has evolved during the same decade. Results imply that German consumers may not have chosen to buy the diesel powered matched pair of a gasoline car they would have bought a few years earlier; instead they selected among the variety of diesel cars available in the market, and preferred a more powerful diesel car than what they might have bought otherwise. These findings reinforce the view that low-carbon transport policies must address the issue of changes in vehicle size and performance, which compromise the environmental effectiveness of regulations. In contrast to current EU regulations, CO2-related standards should discourage increases in a vehicle's weight and power.