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Carbon Prices and Automobile Greenhouse Gas Emissions: The Extensive and Intensive Margins

In: The Design and Implementation of U.S. Climate Policy

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  • Christopher R. Knittel
  • Ryan Sandler

Abstract

The transportation sector accounts for nearly one third of the United States' greenhouse gas emissions. While over the past number of decades, policy makers have avoided directly pricing the externalities from vehicles, both in terms of global and more local pollutants and Corporate Average Fuel Standards have changed little since the mid-1980s, there is now considerable interest in reducing greenhouse gas emissions form the transportation sector. Many have argued that the unique features of the sector imply that pricing mechanisms would have little affect on emissions. This paper analyzes how pricing carbon through either a cap and trade system or carbon tax might affect greenhouse gas emissions from the transportation sector by estimating how changes in gasoline prices alter consumer behavior. We analyze their effect on both the intensive (e.g., vehicle miles travelled) and extensive (e.g., vehicle scrapping) margins. We find large effects on both margins.

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This chapter was published in:

  • Don Fullerton & Catherine Wolfram, 2012. "The Design and Implementation of U.S. Climate Policy," NBER Books, National Bureau of Economic Research, Inc, number full10-1, January.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12134.

    Handle: RePEc:nbr:nberch:12134

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    References

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    1. Shanjun Li & Roger von Haefen & Christopher Timmins, 2008. "How Do Gasoline Prices Affect Fleet Fuel Economy?," NBER Working Papers 14450, National Bureau of Economic Research, Inc.
    2. Glazer, Amihai & Klein, Daniel B. & Lave, Charles, 1995. "Clean on Paper, Dirty on the Road: Troubles with California's Smog Check," University of California Transportation Center, Working Papers qt5514s0hg, University of California Transportation Center.
    3. Christopher Knittel & Daniel Sperling, 2006. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," Working Papers 625, University of California, Davis, Department of Economics.
    4. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2009. "Pain at the Pump: The Differential Effect of Gasoline Prices on New and Used Automobile Markets," NBER Working Papers 15590, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Michael J. Boehm, 2013. "Concentration Versus Re-Matching? Evidence About the Locational Effects of Commuting Costs," CEP Discussion Papers dp1207, Centre for Economic Performance, LSE.
    2. Christopher R. Knittel, 2012. "Reducing Petroleum Consumption from Transportation," NBER Working Papers 17724, National Bureau of Economic Research, Inc.
    3. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
    4. Michael J. Boehm, 2013. "Concentration versus re-matching? Evidence about the locational effects of commuting costs," LSE Research Online Documents on Economics 51542, London School of Economics and Political Science, LSE Library.

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