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Cars, carbon taxes and CO2 emissions

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  • Julius Andersson

Abstract

Is a carbon tax effective in reducing emissions of greenhouse gases, and thereby mitigating climate change? This paper is one of the first empirical analyses of this question and the first to find a significant causal effect on emissions. The author uses a quasi-experimental study of the implementation of a carbon tax and a value added tax on transport fuel in Sweden. The results show that, after the introduction of the taxes in the early 1990s, carbon dioxide emissions from the Swedish transport sector reduced by around 11 percentage points in an average year relative to a comparable synthetic control unit, with the carbon tax alone affecting a 6 percentage point reduction. Importantly, the author also finds that the carbon tax elasticity of demand for petrol/gasoline is three times larger than the price elasticity. This finding suggests that ex-ante policy evaluations of carbon taxes that use existing price elasticities of demand to simulate emission reductions may significantly underestimate their true effect.

Suggested Citation

  • Julius Andersson, 2017. "Cars, carbon taxes and CO2 emissions," GRI Working Papers 212, Grantham Research Institute on Climate Change and the Environment.
    • Handle: RePEc:lsg:lsgwps:wp212
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    References listed on IDEAS

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    Cited by:

    1. Leroutier, Marion, 2022. "Carbon pricing and power sector decarbonization: Evidence from the UK," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    2. Filip Kokotovic & Petar Kurecic & Trina Mjeda, 2019. "Accomplishing the Sustainable Development Goal 13 - Climate Action and the Role of the European Union," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 17(1-B), pages 132-145.
    3. Tvinnereim, Endre & Mehling, Michael, 2018. "Carbon pricing and deep decarbonisation," Energy Policy, Elsevier, vol. 121(C), pages 185-189.
    4. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.
    5. Shmelev, Stanislav E. & Speck, Stefan U., 2018. "Green fiscal reform in Sweden: Econometric assessment of the carbon and energy taxation scheme," Renewable and Sustainable Energy Reviews, Elsevier, vol. 90(C), pages 969-981.
    6. Patrick Criqui & Mark Jaccard & Thomas Sterner, 2019. "Carbon Taxation: A Tale of Three Countries," Sustainability, MDPI, vol. 11(22), pages 1-21, November.
    7. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.

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