Analyzing CO2 emissions from passenger cars in Europe: A dynamic panel data approach

Highlights: • We examine the dynamic relationship between car CO2 emissions and several variables in Europe. • Car CO2 emissions were benefited from technological progress and changes in fuel efficiency. • All variables related to dieselization hold positive relationship with the growth rate of emissions. • The rebound effect of diesel cars has been greater than the effect of fuel efficiency introduced by the dieselization process. • Our results contribute to the dieselization debate about the fuel taxation policy implemented in Europe. -- Abstract: Road transport accounts for 92 per cent of CO2 emissions from all transport services, and car transport makes the largest contribution to the total. We examine the dynamic relationship between car CO2 emissions in western European Union countries (EU-13) with the dieselization of the passenger vehicle fleet, technological progress, fuel efficiency, mobility indicator, economic activity and motorization rate. We take advantage of a panel data set of 13 EU countries between 1990 and 2015 and estimate a Dynamic Panel Data (DPD) model using alternative econometric methods. This approach allows us to estimate the effect on car CO2 emissions of induced indirect channels involving the reaction of economic agents to changes in aforementioned explanatory variables. We provide evidence that CO2 emissions have been benefited from global technological progress and changes in average fuel efficiency, while increases of economic activity, motorization rate and the dieselization process hold positive and significant relationship with car CO2 emissions. These results are consistent with alternative model specifications and econometric methods.