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The drawbacks and opportunities of carbon charges in metropolitan areas -- A spatial general equilibrium approach

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  • Tscharaktschiew, Stefan
  • Hirte, Georg

Abstract

In cities there is a variety of economic and spatial forces that may influence to what extent a travel-related CO2 emission pricing can be an effective instrument to contribute to the achievement of CO2 reduction goals. Therefore, we examine the effectiveness and impact of CO2 emission charges using a spatial general equilibrium model of an urban economy, calibrated according to an average German city. Our analyses suggest that the imposition of a Pigouvian type CO2 emission charge on urban passenger travel may be able to reduce emissions by about 1%-11%, depending on the estimated social damage cost of carbon dioxide. Such a policy increases urban welfare mainly on account of a reduction of congestion costs. However, pricing congestion directly not only provides higher urban welfare but also higher emission reductions. Pricing congestion and CO2 emissions simultaneously allows to achieve a wide range of emission reduction goals. If, however, the reduction goal is very ambitious the emission charge must be raised to higher levels. Then, distortions in the urban markets and in spatial travel decisions lower labor supply and thus urban production, income of city residents, federal tax revenue, income of landowners outside the city, all together implying losses in welfare.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 70 (2010)
Issue (Month): 2 (December)
Pages: 339-357

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Handle: RePEc:eee:ecolec:v:70:y:2010:i:2:p:339-357

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Urban general equilibrium model Climate policy Transport policy CO2 emissions Externalities;

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Cited by:
  1. Tscharaktschiew, Stefan & Hirte, Georg, 2012. "Should subsidies to urban passenger transport be increased? A spatial CGE analysis for a German metropolitan area," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 46(2), pages 285-309.
  2. Rainald Borck, 2014. "Will Skyscrapers Save the Planet? Building Height Limits and Urban Greenhouse Gas Emissions," CESifo Working Paper Series 4773, CESifo Group Munich.
  3. Hirte, Georg & Tscharaktschiew, Stefan, 2011. "Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities," Dresden Discussion Paper Series in Economics 02/11, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  4. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "Income tax deduction of commuting expenses in an urban CGE study: The case of German cities," Transport Policy, Elsevier, vol. 28(C), pages 11-27.
  5. Georg Hirte & Stefan Tscharaktschiew, 2012. "The optimal subsidy on electric vehicles in a metropolitan area - a SCGE study for Germany," ERSA conference papers ersa12p324, European Regional Science Association.
  6. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, Elsevier, vol. 84(C), pages 37-48.
  7. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "The optimal subsidy on electric vehicles in German metropolitan areas: A spatial general equilibrium analysis," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 515-528.

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