Emission standards are one of the major policy tools to reduce greenhouse gas emissions from transportation. The welfare effects from this type of regulation depend on how firms choose to abate emissions: by changing relative prices, by downsizing their fleet or by adopting technology. This...

To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness of alternative tax policies? To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a...