The environmental Effect of Green Taxation : The case of the french "Bonus/Malus"

At the beginning of 2008 was introduced in France a feebate on the purchase of new cars called the “Bonus/Malus”. Since January 2008, the less polluting cars benefited from a price reduction of up to 1,000 euros, while the most polluting ones were subject to a taxation of 2,600 euros. We estimate the impact of this policy on carbon dioxide emissions in the short and long run. These emissions depend on the market shares and the average emissions per kilometer of each car, but also on their manufacturing and the number of kilometers traveled by their owners. We first develop a simple tractable model that relates car choice and mileage. We then estimate this model, using both the exhaustive dataset of car registrations and a recent transportation survey which provides information on individual journeys. We show that if the shift towards the classes benefiting from rebates is spectacular, the environmental impact of the policy is negative. The reform has notably increased sales, leading to an important increase in manufacturing and traveling emissions. We thus stress that such policies may be efficient tools for reducing CO2 emissions (French consumers do react to the feebate in their car choice), but should be designed with care to achieve their primary goal