In recent years governments have began to explore the role of taxation to effect the relative demand for cars with different CO2 emissions. This paper explores the demand response in the market for new cars subsequent to changes in the pricing of vehicle emissions. Our model is founded upon a number of utility components, principally the average utility of each
vehicle choice and variation in utility that derives from both observed and unobserved characteristics. This approach allows for non-proportional substitution and therefore facilitates the estimation of own and cross-elasticities that are consistent with prior expectations. Based upon an assumption of Bertrand pricing our modelling approach accounts for endogeneity of unobserved attributes and price,

We present findings utilising a bespoke survey of households together with a database of new car prices and attributes provided by JATO dynamics.