Emissions trading and road vehicle emission standards

While other sectors have managed to reduce their CO2 emissions over the past few decades, road transport emissions have consistently risen. This prompted the Swedish environmental protection agency Naturvårdsverket to ask CE Delft to carry out a study on how this issue can be resolved.

To this end, CE Delft examined the strengths and weaknesses of emissions trading for road transport, and the pros and cons of combining such a policy with CO2 emission standards for cars. From the results it emerges that combining the two strategies has considerable advantages, as they cancel out each others drawbacks. Thus, while CO2 emission standards for cars lead to no reduction in overall emissions, they do provide a strong incentive for buying fuel-efficient vehicles. What emissions trading does is put a cap on aggregate emissions. However, if this were adopted as an isolated policy, there would no longer be any incentive to buy fuel-efficient vehicles, even though this would then lead to major environmental gains.