German Car Drivers Accept Surcharges for Low-Carbon Vehicles to Protect Climate

Car drivers in Germany are willing to spend more money on low-carbon cars. On average they accept a surcharge of 68 euro for a car emitting one gram per kilometre (g/km) of CO2 less. These are the findings of a recent study conducted by the Centre for European Economic Research (ZEW) in Mannheim. The study analyses what customers were willing to pay for low-carbon cars. The automotive industry is forced to invest in the development of low-carbon cars because of new EU regulations. The study indicates that German car buyers are willing to pay more for a new car in order to protect the climate.

The European Commission has passed a law that from 2015 onwards all newly registered cars must not exceed average carbon emissions of 120 g/km. At the moment new cars registered in the EU have an average carbon emission of 153 g/km. On average car manufacturers have to reduce the carbon emission of their vehicles by 33 g/km in the next few years. Therefore they have to make huge investments as car manufacturers not meeting the requirements will have to face fines.

The automotive industry has higher costs for the development of low-carbon cars. Higher manufacturing cost will most likely lead to higher prices for new cars. The main question is how high the surcharge can be without discouraging the buyer from purchasing a low-carbon car. The ZEW analysed how much more the customers were willing to pay for low-carbon cars by means of a computer based experiment simulating a car purchase. About 600 men and women holding a driving license and wanting to purchase a new car in the near future of all ages, income and education groups could choose between different cars during the experiment. The cars differed in the price, the fuel costs per 100 km, the engine performance, and carbon emissions. The surcharge, which the buyers were willing to pay, could be determined by the customers’ choice between different car alternatives.

The study indicates that the survey participants accepted an average surcharge of 68 euro for a car which saves one gram per kilometre of emissions. To meet the EU limit on carbon emissions, the emissions have to be reduced by an average of 33 g/km by 2015. This means that German car buyers would be willing to spend about 2,200 euro more on a new low-carbon car.

Depending on gender, age and educational background, the amount of money the survey participants were willing to pay varied. Women considered economically friendly cars important and, on average, were willing to pay 87 euro more for a car which reduced the carbon emissions by one gram per kilometre. Therefore women would pay 27 euro more than the men surveyed in the study. The difference was even greater between younger and older customers. Survey participants under 45 of age accepted an average surcharge of 91 euro. Survey participants over 45, however, only wanted to pay 36 euro more for the reduction of one gram per kilometre. Survey participants with tertiary education were willing to pay 21 euro more than participants with other educational backgrounds.

Martin Achtnicht, ZEW researcher responsible for the study, explains: "In reality customers would probably pay even more for low-carbon cars than the estimated 2,000 euro. The experiment did not automatically link lower carbon emissions with lower fuel costs. In reality, cars run on petrol and diesel dominate the market. Reducing the carbon emissions for fossil fuels always reduces the fuel consumption, so consumers can expect lower fuel costs for low-carbon cars. Car buyers will most likely consider these savings in their price calculations."

For further information please contact

Martin Achtnicht, Phone: +49/621/1235-208, E-mail: achtnicht@zew.de