Policy makers in Europe have become increasingly aware of the need to curb the adverse effects of transport externalities, in particular the impact of cars on the environment. In some countries of the European Union, economic instruments have been used to reduce emissions generated by passenger...

A model of optimal car replacement is developed and used to examine the impact of alternative policy measures on the optimal car replacement time and on total emissions of pollutants, when environment policy takes the form of: (i) reduced taxes on purchaso of "clean" cars, (ii) administrative...