Christian Traxler wins research grant to study effects of scrapping, banning and taxing cars

In the last fifteen years, Germany has introduced numerous regulations to reduce car emissions. Three of the most prominent were a scrapping bonus (“Umweltprämie”) for turning in older, dirtier cars, low emission zones that banned heavily polluting cars from city centres, and a tax reform that targeted higher CO2-emitting vehicles. What have been the economic and environmental implications of these programmes? The German Research Foundation has awarded Hertie School Professor of Economics Christian Traxler a research grant to find out. 

In cooperation with Markus Gehrsitz, Assistant Professor of Economics at the University of Strathclyde, Glasgow, the research team will leverage administrative microdata on vehicle registrations to evaluate the impact of the three policy instruments. They are particularly interested in the potential of social interaction to increase the effectiveness of the different policies. For instance, did the scrapping programme from 2009, which subsidised owners of old cars to purchase new vehicles, lead to spillovers on peers who were not eligible to the subsidy? If so, this would mean that the programme had a social multiplier effect with significant environmental benefits.

“Getting old cars off the streets is crucial for reducing emissions. Not only do they emit more pollutants, but emissions also increase with the time the car is used,” Traxler notes. “At the same time, scrapping subsidies are typically expensive and not well targeted. If the programme generated spillovers via social interaction effects, we can better assess its effectiveness.”

With their project, Traxler and Gehrsitz aim at contributing to the academic literature on green transition programmes. While car scrapping programmes and taxes have been well-studied in the US, micro evidence on the effectiveness of such interventions in Germany remains limited. With current public debates on fossil fuels, climate change and just transition, their in-depth research will also inform policy-makers in Germany and beyond.

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