New car taxation and its unintended environmental consequences

In Italy, in 2011, the Superbollo tax was introduced for newly registered cars exceeding 225 kW (later reduced to 185 kW). Although the aim of the tax was not to decrease CO2 emissions but to increase government revenues in a time of economic crisis, we show that it had significant and unintended impacts on buyers’ behaviour. Using data related to vehicles registered between 2008 and 2017 and a difference-in-difference and regression discontinuity design (RDD) framework, we find that the Superbollo had an important role in reducing CO2 emissions and in increasing the share of cars with low CO2 emissions. In particular, we show that the introduction of the Superbollo has shifted consumers towards greener, though not necessarily less energy-intensive cars (e.g., battery electric cars), resulting in a reduction of CO2 emissions per kilometre driven by newly registered cars with engine power between 150 and 200 kW by an order of magnitude of 5–8% and a reduction of kW by 1–4%.