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Reducing CO2 from cars in the European Union


The European Union (EU) recently adopted CO2 emissions mandates for new passenger cars, requiring steady reductions to 95 gCO2/km in 2021. We use a multi-sector computable general equilibrium (CGE) model, which includes a private transportation sector with an empirically-based parameterization of the relationship between income growth and demand for vehicle miles traveled. The model also includes representation of fleet turnover, and opportunities for fuel use and emissions abatement, including representation of electric vehicles. We analyze the impact of the mandates on oil demand, CO2 emissions, and economic welfare, and compare the results to an emission trading scenario that achieves identical emissions reductions. We find that vehicle emission standards reduce CO2 emissions from transportation by about 50 MtCO2 and lower the oil expenditures by about €6 billion, but at a net added cost of €12 billion in 2020. Tightening CO2 standards further after 2021 would cost the EU economy an additional €24–63 billion in 2025, compared with an emission trading system that achieves the same economy-wide CO2 reduction. We offer a discussion of the design features for incorporating transport into the emission trading system.

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Fig. 1

Data source ICCT (2014a), EPRS (2014)

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We are thankful to Jamie Bartholomay and three anonymous reviewers for their valuable contribution. The authors affiliated with the MIT Joint Program on the Science and Policy of Global Change gratefully acknowledge the financial support to the Program from the U.S. Department of Energy, Office of Science under DE-FG02-94ER61937, the U.S. Environmental Protection Agency under XA-83600001-1, and other government, industry, and foundation sponsors of the Joint Program on the Science and Policy of Global Change (For a complete list of sponsors, please visit The authors affiliated with the ZEW gratefully acknowledge funding by Adam Opel AG/General Motors and BMW as part of the project “The Future of Europe’s Strategy to Reduce CO2 Emissions from Road Transport”. Any opinions expressed in the paper are those of the authors.

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Correspondence to Sergey Paltsev.

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Paltsev, S., Henry Chen, YH., Karplus, V. et al. Reducing CO2 from cars in the European Union. Transportation 45, 573–595 (2018).

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  • Emission trading
  • Emission standards
  • European Union
  • Carbon emissions
  • Passenger cars