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

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16482.

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Date of creation: Oct 2010
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Publication status: published as
Handle: RePEc:nbr:nberwo:16482

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  1. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 29(1), pages 113-134.
  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. Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 1(2), pages 113-37, August.
  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," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 51542, London School of Economics and Political Science, LSE Library.
  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," CEP Discussion Papers, Centre for Economic Performance, LSE dp1207, Centre for Economic Performance, LSE.

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