IDEAS home Printed from https://ideas.repec.org/p/cdl/uctcwp/qt6sz198c2.html
   My bibliography  Save this paper

New Vehicle Choices, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and Gasoline Tax

Author

Listed:
  • Martin, Elliot William

Abstract

Automobiles impose considerable public costs in the form of emissions and foreign oil  dependence. Public policy has thus taken a considerable interest in influencing the  technology and fuel economy associated with new vehicles brought to market. In spite of  this interest, there is very limited information on the effectiveness of these policies in  reducing greenhouse gas emissions or shifting vehicle demands. This is in part due to the  fact that modeling the demand for automobiles is wrought with many challenges. These include large choice sets that change frequently over time and significant data collection obstacles. This work proposes a methodology for data development that simplifies many of the challenges associated with data collection in automotive modeling. The methodology explores a technique to merge data on aggregate sales with disaggregate vehicle holdings data to synthesize a complete dataset that preserves the strengths of both. The merged dataset is used to estimate a logit choice model of automotive choice  that is applied in evaluating the effectiveness of hybrid tax credits and the gasoline tax in reducing greenhouse gas emissions. Policy simulations suggest that hybrid tax credits  have saved an average 1.5 million metric tons of greenhouse gas emissions based on sales between 2006 and 2007. When considered in conjunction with the cost of the policies, the credits appear to have a cost effectiveness ranging between $1000 to $3000 per metric ton of greenhouse gas emissions reduced. Hybrid tax credits are also found to be more effective than a doubling of the gasoline tax in shifting the new vehicle stock towards more fuel efficient vehicles. Finally, the model evaluates the market willingness to pay for fuel cost reduction. The results suggest an average willingness to pay of $522 in purchase price per 1¢ reduction in fuel cost per mile. This means that reasonable circumstances exist in which some buyers will pay more for fuel economy than they save in fuel cost expenses over the life span of their automobiles.

Suggested Citation

  • Martin, Elliot William, 2009. "New Vehicle Choices, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and Gasoline Tax," University of California Transportation Center, Working Papers qt6sz198c2, University of California Transportation Center.
  • Handle: RePEc:cdl:uctcwp:qt6sz198c2
    as

    Download full text from publisher

    File URL: http://www.escholarship.org/uc/item/6sz198c2.pdf;origin=repeccitec
    Download Restriction: no

    References listed on IDEAS

    as
    1. McCarthy, Patrick S, 1996. "Market Price and Income Elasticities of New Vehicles Demand," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 543-547, August.
    2. 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, vol. 29(1), pages 113-134.
    3. Herriges, Joseph A. & Kling, Catherine L., 1996. "Testing the consistency of nested logit models with utility maximization," Economics Letters, Elsevier, vol. 50(1), pages 33-39, January.
    4. Small, Kenneth A, 1987. "A Discrete Choice Model for Ordered Alternatives," Econometrica, Econometric Society, vol. 55(2), pages 409-424, March.
    5. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, December.
    6. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    7. Bhat, Chandra R. & Sen, Sudeshna, 2006. "Household vehicle type holdings and usage: an application of the multiple discrete-continuous extreme value (MDCEV) model," Transportation Research Part B: Methodological, Elsevier, vol. 40(1), pages 35-53, January.
    8. Berkovec, James & Rust, John, 1985. "A nested logit model of automobile holdings for one vehicle households," Transportation Research Part B: Methodological, Elsevier, vol. 19(4), pages 275-285, August.
    9. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    10. Turrentine, Tom & Kurani, Kenneth S, 2007. "Car buyers and fuel economy?," Institute of Transportation Studies, Working Paper Series qt56x845v4, Institute of Transportation Studies, UC Davis.
    11. Molly Espey & Santosh Nair, 2005. "Automobile Fuel Economy: What Is It Worth?," Contemporary Economic Policy, Western Economic Association International, vol. 23(3), pages 317-323, July.
    12. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April.
    13. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
    14. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    15. Mannering, Fred & Winston, Clifford & Starkey, William, 2002. "An exploratory analysis of automobile leasing by US households," Journal of Urban Economics, Elsevier, vol. 52(1), pages 154-176, July.
    16. Choo, Sangho & Mokhtarian, Patricia L., 2004. "What type of vehicle do people drive? The role of attitude and lifestyle in influencing vehicle type choice," Transportation Research Part A: Policy and Practice, Elsevier, pages 201-222.
    17. Arguea, N M & Hsiao, C & Taylor, G A, 1994. "Estimating Consumer Preferences Using Market Data--An Application to U.S. Automobile Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(1), pages 1-18, Jan.-Marc.
    18. Berkovec, James, 1985. "Forecasting automobile demand using disaggregate choice models," Transportation Research Part B: Methodological, Elsevier, vol. 19(4), pages 315-329, August.
    19. McManus, Walter, 2007. "The link between gasoline prices and vehicle sales:economic theory trumps conventional Detroit wisdom," MPRA Paper 3463, University Library of Munich, Germany.
    20. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
    21. Train, Kenneth E. & Davis, William B. & Levine, Mark D., 1997. "Fees and rebates on new vehicles: Impacts on fuel efficiency, carbon dioxide emissions, and consumer surplus," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 1-13, March.
    22. Small, Kenneth A., 1994. "Approximate generalized extreme value models of discrete choice," Journal of Econometrics, Elsevier, vol. 62(2), pages 351-382, June.
    23. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    24. Cowling, Keith & Cubbin, John, 1972. "Hedonic Price Indexes for United Kingdom Cars," Economic Journal, Royal Economic Society, vol. 82(327), pages 963-978, September.
    25. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February.
    26. Kling, Catherine L. & Herriges, Joseph A., 1995. "Empirical Investigation of the Consistency of Nested Logit Models with Utility Maximization (An)," Staff General Research Papers Archive 1499, Iowa State University, Department of Economics.
    27. Mannering, Fred L. & Train, Kenneth, 1985. "Recent directions in automobile demand modeling," Transportation Research Part B: Methodological, Elsevier, vol. 19(4), pages 265-274, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Gaker & Joan L. Walker, 2013. "Revealing the Value of “Green” and the Small Group with a Big Heart in Transportation Mode Choice," Sustainability, MDPI, Open Access Journal, vol. 5(7), pages 1-15, July.

    More about this item

    Keywords

    Architecture;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:uctcwp:qt6sz198c2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff). General contact details of provider: http://edirc.repec.org/data/itucbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.