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Abstract We analyze the evolution of CO2 emissions of new vehicles sold in France between 2003 and 2008. We investigate in particular the effect of two policies introduced during that time: the energy label requirement, which went into effect in the end of 2005, and a feebate based on CO2 emissions of new vehicles in 2008. We estimate a flexible model of demand for automobiles that incorporates consumers’ heterogeneity and valuation of vehicle CO2 emissions. Our results show that there has been a shift in preferences towards low-emitting cars. Moreover, the timing of these changes is consistent with the introduction of the two policies. This suggests that the feebate had a crowding-in effect in addition to its price effect. Overall, the change in preferences accounts for 40% of the overall decrease in average CO2 emissions of new cars in the period.
