Policies aimed at encouraging the take-up of green cars may have unexpected results on both emissions and markets.

Road transportation currently contributes to 19 per cent of CO2 emissions in Sweden, a figure that is higher than the EU’s average. From 2007 to 2009, the Swedish government put in place a Green Car Rebate to encourage people to buy lower emission cars. Cristian Huse and Claudio Lucinda assess the effectiveness of the policy, finding that while it did reduce CO2 emission levels, there was also little need to subsidise the purchase of vehicles that can use both petrol and alternative fuels.