The automotive industry is one of the largest polluters, affecting air quality in urban areas. For this reason, the effect of the public policies on the sector is very important in economic and social terms. In this sense, one of the policies has been the subsidies for efficient vehicles where the plug-in hybrid electric vehicles (PHEVs) are included. Subsidies are very important for some of these vehicles, with a real price which is not competitive in comparison with internal combustion (IC) cars. As an example, the sales have dropped in Denmark in 2016 after the incentive reduction. However, in some cases, policies designed to regulate the situation can create some perverse effects due to the complexity of this issue. This type of vehicle is powered by an IC engine in combination with one or more electric motors using energy stored in battery packs. The real efficiency of this kind of vehicle depends strongly on the responsibility of the owner. Only if the car has been plugged in, their batteries have been fully charged and also the car is driven under “efficient mode”, the emissions will reduce significantly. Considering the fuel consumption gap between manufacturer declaration and real drive test and the emissions in different pollutants of the PHEVs in comparison with IC cars, the aim of this article is to show a new possible perverse effect generated by them. This has happened recently with diesel cars, favoured by policies focused in CO2 emission, generating NOX high level in the urban area air quality.Finally, we highlight the main result and conclude emission cost implemented in fuel tax as ‘the first best’ in environmental policies.
air quality, CO2 , environmental policy, internal combustion vehicles (IC), NOX , plug-in hybrid electric vehicles (PHEVs)
 Automotive industry | Internal Market, Industry, Entrepreneurship and SMEs [Internet], available at https://ec.europa.eu/growth/sectors/automotive_en, [accessed 6 March 2019]
 ACEA_Pocket_Guide_2018-2019.pdf [Internet], available at https://www.acea.be/uploads/publications/ACEA_Pocket_Guide_2018-2019.pdf, [accessed 6 March 2019]
 European Commission - PRESS RELEASES - Press release - Commission warns Germany, France, Spain, Italy and the United Kingdom of continued air pollution breaches [Internet], available at http://europa.eu/rapid/press-release_IP-17-238_en.htm, [accessed 27 February 2019]
 Air Toxics Emissions: EPA’s Strategy for Reducing Health Risks in Urban Areas. 4.
 File:Greenhouse gas emissions, analysis by source sector, EU-28, 1990 and 2015 (percentage of total) new.png – Statistics Explained [Internet], available at https://ec.europa. eu/eurostat/statistics-explained/index.php?title=File:Greenhouse_gas_emissions,_ analysis_by_source_sector,_EU-28,_1990_and_2015_(percentage_of_total)_new.png,[accessed 27 February 2019]
 Emissions of air pollutants from transport — European Environment Agency [Internet], available at https://www.eea.europa.eu/data-and-maps/indicators/transport-emissions-of-air-pollutants-8/transport-emissions-of-air-pollutants-6, [accessed 27 February 2019]
 ACEA_Report_Vehicles_in_use-Europe_2017.pdf [Internet], available at https://www. acea.be/uploads/statistic_documents/ACEA_Report_Vehicles_in_use-Europe_2017. pdf, [accessed 7 March 2019]
 Difference Between Hybrid, Mild Hybrid, BEV and PHEV [Internet], available at https://www.autotrader.ca/newsfeatures/20180410/types-of-electric-vehicles-explained/, [accessed 10 April 2019].
 Santos, G., Behrendt, H., & Teytelboym, A., Part II: Policy instruments for sustainable road transport. Research in Transportation Economics, 28(1), pp. 46–91, 2010 Jan.
 Portney, P.R., Parry, I.W., Gruenspecht, H.K., & Harrington W., Policy watch: The economics of fuel economy standards. Journal of Economic Perspectives, 17(4), pp. 203–17, 2003 Nov.
 Tsiakmakis, S., Fontaras, G., Cubito, C., Pavlovic, J., Anagnostopoulos, K., & Ciuffo, B., From NEDC to WLTP: effect on the type-approval CO2 emissions of light-duty vehicles. 50.
 Mercedes, the greatest deception in Europe’s car fuel economy history – report | Transport & Environment [Internet], available at https://www.transportenvironment.org/press/mercedes-greatest-deception-europe%E2%80%99s-car-fuel-economy-history-report, [accessed 27 February 2019]
 ADAC EcoTest - Fünf Sterne für die Umwelt [Internet], available at https://www.adac. de/infotestrat/tests/eco-test/default.aspx, [accessed 19 February 2019 ]
 Health and Environmental Effects of Particulate Matter (PM) | Particulate Matter (PM) Pollution | US EPA [Internet], available at https://www.epa.gov/pm-pollution/health-and-environmental-effects-particulate-matter-pm, [accessed 27 February 2019]
 Global EV Outlook 2017. pp. 71, 2017.
 Government-subsidised plug-in cars may never have been charged – BBC News [Internet], available at https://www.bbc.com/news/business-46152853, [accessed 27 February 2019]
 Rendeiro Martín-Cejas, R., & Pablo Ramírez Sánchez, P., Ecological footprint analysis of road transport related to tourism activity: The case for Lanzarote Island. Tour management, 31(1), pp. 98–103, 2010 Feb.
 Acutt, MZ., & Dodgson, JS., Controlling the environmental impacts of transport: Matching instruments to objectives. Transportation Research Part D: Transport and Environment, 2(1), pp. 17–33, 1997 Mar.
 Cremer, H. & Gahvari, F., Second-best taxation of emissions and polluting goods. 80, 169 p, 2001.
 Verbeek, M., Internalisation Measures and Policies for All external Cost of Transport (IMPACT). :336.