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CO2 mitigation in road transport: Gasoline taxation and/or fuel-efficiency regulation?

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Abstract

Although gasoline taxes are widely used (nearly) efficient CO2 emission controls, additional fuel-efficiency regulation is applied e.g. in the USA and in Europe. In a simple analytical model, we specify the welfare implications of (i) gasoline taxes, (ii) of 'gas-guzzler taxes' (iii) of fuel-efficiency standards, and of combinations of the above. Both forms (ii) and (iii) of fuel-efficiency regulation turn out to produce the same suboptimally low emission rates. Combining (i) and (ii) is also distortionary, while efficiency can be secured by combining (i) and (iii). However, in the optimal mix of the latter two instruments the fuel-efficiency standard is redundant.

Suggested Citation

  • Rüdiger Pethig, 2009. "CO2 mitigation in road transport: Gasoline taxation and/or fuel-efficiency regulation?," Volkswirtschaftliche Diskussionsbeiträge 133-09, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    • Handle: RePEc:sie:siegen:133-09
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    File URL: http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/133-09.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Gas taxes are still the best option to reduce CO2 emissions
      by Economic Logician in Economic Logic on 2009-10-06 19:01:00

    More about this item

    Keywords

    CO2 emissions; road transport; fuel efficiency regulation; gasoline tax;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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