Zeitschrift für Wirtschaftspolitik

The economic literature suggests that a cost-efficient climate protection policy should primarily rely on the price mechanism and emissions trading. An emissions trading system has been in place in the European Union since 2005, but only covers a few sectors, such as the energy and the industry sector. In other sectors, attempts are instead being made to reduce greenhouse gas emissions by means of regulatory measures such as bans, particularly in Germany. This paper estimates the emission abatement costs of regulatory measures such as EU emission standards for cars and a general speed limit on highways. While the costs of regulatory measures are notoriously opaque, our exemplary calculations for speed limits show that bans can entail high hidden costs. To avoid making climate protection more expensive than necessary, politicians should therefore refrain from regulatory measures such as bans and rely more heavily on the highly effective and cost-efficient instrument of emissions trading.