Conference Agenda

A number of countries (including France, Norway, Italy, and others) have adopted

policies to incentivize the purchase of low-emissions or electric vehicles (EVs) and penalize those of high emitters. Recent studies have examined the effectiveness and/or cost-effectiveness of these schemes in terms of CO2 emissions avoided or induced vehicle purchases, and have typically assumed away policy anticipation or other effects that would render these policies much less cost-effective. We examine the Italian bonus-malus policy, which was implemented between 2019 and 2022 to reduce CO2 emissions from new passenger cars. We ask three main research questions.

First, did consumers respond to these incentives at all? Second, is there evidence that car buyers postponed their purchases of low emitters to benefit from the bonus? Third, did consumers interested in high-emission cars anticipate purchasing to dodge the malus? We use monthly new car registration data from Italy from January 2017 to December 2022, a period during which the policy was revised multiple times. The revisions concerned the eligible CO2 emissions bands, maximum vehicle price, and the bonus or malus amounts, providing variation that we exploit to identify the effect of the bonus and malus. We find that new car sales were significantly affected

by the bonus, but not by the malus. Our models attribute to the bonus an increase of about 22% in the sales of bonus-eligible vehicles. The “additionality” is however modest (10%-20%), which implies pervasive free riding (80%-90%). We find evidence of anticipation effects, with sales of vehicles eligible for future incentives decreasing in the months between the passage of the law (Dec. 2018) and the program’s onset (Mar. 2019). This “anticipation” effect accounts for 21%-45% of the sales attributable to the bonus program.

The production of low-quality secondary material, also called downcycling, is a common issue in the recycling sector but is rarely examined in theoretical economic models. Our paper proposes a modeling of this issue in a static partial equilibrium framework, then discusses various policy instruments boosting the production of secondary materials. The model focuses on waste processing after the collection stage. It is composed of a waste-processing sector collecting and processing waste into secondary materials of high- and low-quality. A final product sector produces manufactured goods of high- and low-economic value using secondary and virgin materials as imperfect substitutes. Comparative statics is performed to study the effect of various policy instruments. It appears that instruments targeting high-quality products benefit the entire waste-processing sector, while instruments enhancing low-quality outputs have a more limited or even negative impact on other outputs. A large difference between the prices of the recyclate and the downcyclate proves determinant in the choice of production of the waste-processing sector.

This study evaluates the environmental effectiveness of Japan’s eco-car tax incentive program by explicitly accounting for the strategic weight manipulation by automobile manufacturers. Using monthly vehicle-level panel data from 2005 to 2021, we estimate a structural demand model for the Japanese passenger car market to examine how firms respond to weight-based fuel economy standards.

Our results show that vehicles strategically adjusted to exceed regulatory weight thresholds experienced a 31% increase in relative market share, reflecting a substantial demand expansion driven by regulatory compliance rather than genuine fuel efficiency improvements. To assess the broader implications, we conduct a structural substitution counterfactual analysis comparing the observed outcomes with a no-manipulation benchmark.

The counterfactual analysis reveals that strategic weight manipulation increases the sales of manipulated vehicles by 102,771 units and reduces the sales of compliant vehicles by only 3,707 units. This asymmetric displacement indicates that manipulation primarily expands overall demand rather than reallocating sales among substitutes. The resulting demand distortion produced a net increase of 133,162 tons of CO₂ emissions over the sample period, substantially undermining the policy’s emissions-reduction objectives.

Our findings demonstrate that weight-class-based fuel economy regulation creates strong incentives for regulatory gaming, which materially weakens environmental effectiveness. The results highlight the need for policy designs that minimize discrete eligibility thresholds and reward continuous and verifiable improvements in real-world fuel efficiency.

This paper builds and employs a new analytical general equilibrium model to find a closed-form solution for the second-best optimal (SBO) tax on a relatively “good” clean production or disposal method, and the SBO tax rate on a “bad” polluting production or disposal method, in the case where no tax can be imposed or enforced on the most polluting “ugly” production or disposal method (e.g., illegal dumping). This model can be applied to any environmental pollution problem, including disposal into the air, water, or land. We use intuition from Corlett and Hague (1953) to show that the tax on bad disposal might be lower than the tax on good disposal, if ugly disposal is enough better as a substitute for bad disposal than it is for good disposal. Our model captures not only differences in how the partial equilibrium cross-price elasticities help determine general equilibrium effects of each available disposal tax, but also how all own-price and cross-price elasticities and share parameters help determine those general equilibrium outcomes, including the amount of untaxed ugly disposal. And this general equilibrium change in each disposal amount is what matters for setting the two SBO tax rates. We also show how these elasticities combine with each disposal method’s marginal external damage parameter to determine the two SBO tax rates on good and bad disposal.