In this paper, we simulate the car market in order to forecast the effects of feebate systems based on an energy-labeling scheme using categories A to G. Very fuel-efficient (A) cars receive a cash incentive, highly inefficient (G) cars pay additional fees. Consumers have different price elasticities and behavioral options to react to feebates. They can switch to a smaller sized car, but as energy-efficiency varies widely within size segments, they can also stick to the preferred size class and choose a more efficient (smaller) engine. In addition, previously owned cars influence the next car to be chosen, We use an agent-based microsimulation approach particularly suited to predict environmental and market effects of feebates. Heteorogenous agents choose from a choice set drawn from a detailed fleet of new cars. Incentives of (sic)2000 for A-labeled cars induce an additional rated CO2 emission decrease of new car registrations between 3.4% and 4.3%, with CO2 abatement costs between (sic)6 and (sic)13 per ton, and otherwise little undesired market disturbance. The risk of rebound effects is estimated to be low. After adopting the frequencies of consumer segments to a given country, the model presented is applicable to all European car markets. (C) 2008 Elsevier Ltd. All rights reserved.