Preferences for energy efficient cars in New Delhi: a discrete choice experiment exploring regulatory and non-regulatory interventions

Abstract

Tackling India’s contribution to global carbon emissions is a priority from both national and international perspectives. Energy efficiency gains in Indian’s transportation sector have been suggested as a promising way to mitigate carbon emissions. The Indian government is considering fuel efficiency labels for new passenger cars. Via a discrete choice experiment, this paper investigates how regulatory and non-regulatory interventions can be used to boost adoption of energy efficient cars in India. It estimates New Delhi’s car buyers’ willingness to pay (WTP) for a car displaying a best-efficiency label (which is about 54 to 85% more fuel efficient as compared to a usual car) to be 6 thousand USD or about 30% of what respondents would be willing to pay for a new car. However, the informational nudge embedded in labeling systems may not be enough to boost uptake of efficient cars. Thus, via a split-sample approach, it further investigates the potential of combining non-regulatory interventions—labeling system and peer effects—with a driving restrictions regulation. WTP for a best-efficiency label car increases by over 100% to 13.46 thousand USD under a driving restrictions regulation. The difference in WTP for a best-efficiency label across driving restrictions and no driving restrictions scenarios reflect regulatory costs faced by car drivers. By including an interaction effect between best-efficiency label and mileage in the econometric specifications, we show that these costs depend on the actual mileage of the car under consideration—with lower regulatory costs as actual efficiency improves. A latent class logit specification suggests that around 40% to 52% of respondents—labeled extrinsically-motivated adopters—would be responsive to peer effects.