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Measuring Market Damage of Automobile Related Carbon Tax by Dynamic Computable General Equilibrium model

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  • Shinichi Muto

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  • Hisa Morisugi

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  • Taka Ueda

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    Abstract

    This paper provides the political evaluation of automobile related carbon tax to control CO2 emissions caused by automobiles. In Japan, the Ministry of Transport presented the target to bring the increasing rate of the CO2 emissions in the transport sector fewer than 17% from 1990 level. We computed the carbon tax needed to accomplish its target by the dynamic computable general equilibrium (DCGE) model. In the DCGE model, the economic activities of households or industries are formulated by mathematical economic model, so we are able to grasp market disbenefits generated from the change of economic activities as well as the regulated volume of the CO2 emissions. The market disbenefits are called by deadweight loss, and we computed those value amounts by the concept of equivalent variation. The CGE approaches have been developed to evaluate economic impacts of the change of taxation or international trade policy, which are surveyed by Shoven and Whalley (1984). Recently, the CGE models to compute general equilibrium effects of environmental policies have been proposed by Jorgenson and Wilcoxen (1990), Bergman (1991), Ballard and Medema (1993) and Zhang (1998), and so on. And the CGE approaches have been extended to the dynamic analysis, in order to measure the environmental effects or economic influences in the point of long-term for environmental problems. The DCGE model, built in this research, follows those previous CGE approaches in principle. We modeled, however, the automobile related industrial or transport sector?s behavior and household travel behavior in full. Especially, the travel behavior for private tips of household is formulated by the probability choice paradigm shown by McFadden. By using this DCGE model, we simulated the automobile related carbon tax needed to accomplish the target in the transport sector. At this simulation, we afraid that the fuel price elasticity might give a lot of impacts to the simulation results. So we executed the sensitivity analysis by giving the fuel price elasticity of two patterns. At the case of fuel price elasticity 0.1, the automobile related carbon tax is calculated by 0.11[million yen/tC] and the market disbenefit is evaluated by 0.16[billion yen/year]. Next, at the case of fuel price elasticity 0.3, the carbon tax is 0.114[million yen/tC] and the market disbenefit is 0.2[billion yen/year].

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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa03p257.

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    Date of creation: Aug 2003
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    Handle: RePEc:wiw:wiwrsa:ersa03p257

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    1. Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Discussion Papers dp-98-22, Resources For the Future.
    2. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, October.
    3. Lars Bergman, 1991. "General equilibrium effects of environmental policy: A CGE-modeling approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(1), pages 43-61, March.
    4. DE BORGER, Bruno & SWYSEN, Didier, 1998. "Optimal pricing and regulation of transport externalities: A welfare comparison of some policy alternatives," SESO Working Papers 1998004, University of Antwerp, Faculty of Applied Economics.
    5. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
    6. Jorgenson, Dale W. & Wilcoxen, Peter J., 1990. "Intertemporal general equilibrium modeling of U.S. environmental regulation," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 715-744.
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