Environmental effects of a vehicle tax reform: Empirical evidence from Norway

In 2007, the Norwegian government reformed the vehicle registration tax in order to reduce the carbon intensity of the new car fleet by incentivizing the purchase of more fuel efficient cars. This paper identifies the impact of the new tax structure on three main dimensions: (i) the average CO2 emissions intensity of new registered vehicles, (ii) the relative change in sales between low and high CO2-intensive cars and (iii) the market share of diesel cars. The results show that the average CO2 intensity of new vehicles was reduced by about 7.5 g of CO2/km in the year of the implementation of the reform. This reduction is the result of a 12 percentage points drop in the share of high CO2-intensive vehicles and of an increase of about 20 percentage points in the market share of diesel cars.