Are consumers abandoning diesel automobiles because of contrasting diesel policies? Evidence from the Korean automobile market

Abstract

We investigate whether the contrasting set of transportation policies in Korea — reductions in fuel taxes and increases in diesel automobile prices — has decreased emissions. Using a random-coefficient discrete choice model and hypothetical policy sets, we estimate the automobile demand of consumers, the market share of cars by fuel type, and total emissions, assuming that consumer preferences for driving costs change over time. Then, we separately analyze the effect of each policy set on automobile sales and emissions, particularly carbon dioxide, nitrogen oxide, and particulate matter. Our analyses reveal that Korean consumers have become more sensitive toward fuel costs over time and that the emission consequences of Korean policies depend on consumer preferences.