oxygen the result is mainly water and carbon dioxide. Thus, the amount of CO2 increases linearly in the amount of
fuel combusted by a car (National Research Council, 2002; U.S. Environmental Protection Agency 2009) and no
mitigating technologies are available (Parry, Walls, and Harrington 2007). To check this empirically we have estimated
a set of OLS models using data on fuel economy and CO2 emissions at a model-engine-year level collected
by the Vehicle Certification Agency of the United Kingdom Department for Transport. Specifically, denote
the amount of CO2 per kilometre produced by a car, where p identifies the producer, m the model, g the engine type,
and t the year of production, we estimate