Supporting efficient automobiles is not sufficient

Institutional Communication Service

Prof. Massimo Filippini, USI Faculty of Economics and ETH Zurich

Consumer awareness with regard to energy saving has recently become much more pronounced. The shared project between Institute of Economics (IdEP) and the Center for Energy Policy and Economics (CEPE) of the Zurich Polytechnic (ETH Zurich) regarding public policies aimed at incentivising the use of “efficient” cars in order to save energy is therefore of particular interest.

In accordance with the objective of limiting the increase in global temperature to a maximum of two degrees compared with 1990, in 2011 Switzerland approved the so-called CO2 Act which aims at reducing emissions by 20% by the year 2020 with respect to 1990. The proposal to introduce a tax on CO2, which by increasing per-km travelling costs should in the last analysis incentivise the purchase of more efficient cars, has not yet found a favourable political majority, but various measures have been adopted to achieve the objectives of the law: on the one hand an energy label has been introduced to differentiate vehicles on the basis of their CO2 emissions and fuel consumption, on the other provisions have come into force imposing specific emission restrictions on importers with regard to new car fleets.

As is well known, every year in Switzerland a registration tax must be paid for vehicles, a tax which some cantons have made more “ecological” by introducing a reduction (bonus) for more energy-efficient cars and at the same time an increase (malus) for those which are particularly inefficient and polluting. The new tax structure is a good choice in that it incentivises demand for new, ecological vehicles to the detriment of inefficient ones and at the same time rebalances the state budget, given that the lower tax receipts due to the bonus should be compensated for by the greater ones due to the malus (incidentally, the study shows that the German-speaking cantons of Switzerland use cars with higher emissions that those in use in the French- and Italian-speaking cantons).

In its analysis of the proportion of Category A cars (the most “virtuous” ones) achieved since the introduction of financial incentives for their purchase, our study shows a small statistically significant increase. Essentially, however, the study acknowledges that the policies aimed at reducing the rate of CO2 emissions per km travelled have had a lesser impact that might be reasonably expected.

The reduced impact of the bonus/malus system could be due to the fact that not all consumers are aware of the environmental taxation system or, as shown in other recent studies conducted at USI and at ETH Zurich, to the presence of consumers that are defined by “bounded rationality”, i.e. that make rapid choices and with limited cognitive effort. A rational investment choice based on an investment evaluation requires, time and effort. From the point of view of energy policy, these results show the importance of raising the awareness of consumers, through a simple calculation of return on investment, of how well-directed and environmentally friendly choices can be made.

For the full study: Economic analysis of policy measures to reduce CO2 emissions of passenger cars in Switzerland: http://bit.ly/2ptgvJk

For more info on behavioral economics in the energy sector: “Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances”. Julia Blasch, Massimo Filippini, and Nilkanth Kumar, pubblicato su “Resource and Energy Economics” (see the link). 

 

Sections