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Fiscal policy instruments for reducing congestion and atmospheric emissions in the transport sector : a review

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  • Timilsina, Govinda R.
  • Dulal, Hari B.

Abstract

This paper reviews the literature on the fiscal policy instruments commonly used to reduce transport sector externalities. The findings show that congestion charges would reduce vehicle traffic by 9 to 12 percent and significantly improve environmental quality. The vehicle tax literature suggests that every 1 percent increase in vehicle taxes would reduce vehicle miles by 0.22 to 0.45 percent and CO2 emissions by 0.19 percent. The fuel tax is the most common fiscal policy instrument; however its primary objective is to raise government revenues rather than to reduce emissions and traffic congestion. Although subsidizing public transportation is a commonpractice, reducing emissions has not been the primary objective of such subsidies. Nevertheless, it is shown that transport sector emissions would be higher in the absence of both public transportation subsidies and fuel taxation. Subsidies are also the main policy tool for the promotion of clean fuels and vehicles. Although some studies are very critical of biofuel subsidies, the literature is mostly supportive of clean vehicle subsidies.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4652.

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Date of creation: 01 Jun 2008
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Handle: RePEc:wbk:wbrwps:4652

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Keywords: Transport Economics Policy&Planning; Environmental Economics&Policies; Transport and Environment; Taxation&Subsidies; Transport in Urban Areas;

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References

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Citations

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Cited by:
  1. Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2010. "Fuel tax incidence in developing countries: The case of Costa Rica," Energy Policy, Elsevier, vol. 38(5), pages 2208-2215, May.
  2. Parry, Ian W.H. & Timilsina, Govinda R., 2012. "Demand side instruments to reduce road transportation externalities in the greater Cairo metropolitan area," Policy Research Working Paper Series 6083, The World Bank.
  3. Batarce, Marco & Ivaldi, Marc, 2010. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," TSE Working Papers 10-226, Toulouse School of Economics (TSE), revised Apr 2011.
  4. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
  5. Kalim Shah & George Philippidis & Hari Dulal & Gernot Brodnig, 2014. "Developing biofuels industry in small economies: Policy experiences and lessons from the caribbean basin initiative," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(2), pages 229-253, February.
  6. Batarce, Marco & Ivaldi, Marc, 2011. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," CEPR Discussion Papers 8416, C.E.P.R. Discussion Papers.

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