APL (Ajiken Power Lunch)

Thursday, the 16th of July, 11:00 a.m. to 12:15 p.m.

IDE-JETRO C23 Meeting Room

We study anticipatory behavior by firms and households in vehicle markets. Using administrative data from Sweden on vehicle registrations linked to individual and firm characteristics, we document that the early announcement of Sweden’s 2018 feebate policy caused anticipatory vehicle adoption. To avoid the forthcoming higher road taxes, households and firms systematically brought forward the adoption of more emissions-intensive vehicles, resulting in a dirtier vehicle fleet ahead of implementation. Anticipatory adoption is most pronounced among those for whom acting early is easiest or adapting to the policy is most costly. In particular, we provide novel evidence of a dealer loophole that facilitated policy avoidance and show that dealers’ early vehicle registration is responsible for half of all anticipatory purchases. Additionally, household and firm liquidity, and information salience amplify anticipatory purchases, while access to charging infrastructure mitigates them by lowering the cost of switching to cleaner vehicles. We develop an empirical framework to quantify the environmental implications of anticipatory behavior that includes the higher emissions intensity of pre-implementation purchases as well as the benefits from the accelerated fleet turnover and estimate environmental costs of approximately $28.42 million — around 21 percent of the policy’s 2019 budget and 19 percent of lifetime environmental benefits from rebate-eligible cars adopted in 2019.

Ms Jinjing Chen (University of Melbourne)

Masanori Matsuura