The consequences of a British combustion engine ban

Many countries plan to ban the sale of new combustion engine vehicles. I examine the impact of introducing such a ban in Great Britain in 2023, estimating demand, and calculating the reduction in the carbon externality using data on vehicle emissions and individual mileages. This reveals issues with the ban’s design, mainly due to hybrids’ popularity: anticipation will not incentivise firms to develop electric vehicles, low-income households would be harmed most, and CO2 emissions would not be substantially reduced. Using a revenue-neutral combination of sales taxes and subsidies delivers 50% of the ban’s climate benefit at 15% of the cost.