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A Tale of Two Tails: Commuting and the Fuel Price Response in Driving

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  • Kenneth Gillingham
  • Anders Munk-Nielsen

Abstract

Pricing greenhouse gases is widely understood as the most efficient approach for mitigating climate change, yet distributional effects hamper political acceptance. These distributional effects are especially important in transport, the fastest growing sector for greenhouse gas emissions. Using rich data covering the entire population of vehicles and households in Denmark, this study uncovers an important feature of driving demand: two groups of much more responsive households in the lower and upper tails of the work distance distribution. We further estimate the causal effect of public transport–a critical determinant of the upper tail–and show how public transport access can both reconcile differences in fuel price elasticities between the United States and Europe, and considerably influence the distributional effects of fuel pricing.

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  • Kenneth Gillingham & Anders Munk-Nielsen, 2017. "A Tale of Two Tails: Commuting and the Fuel Price Response in Driving," CESifo Working Paper Series 6792, CESifo.
    • Handle: RePEc:ces:ceswps:_6792
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    Cited by:

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    2. Mateus Rodrigues & Daniel Da Mata & Vitor Possebom, 2024. "Free Public Transport: More Jobs without Environmental Damage?," Papers 2410.06037, arXiv.org.
    3. Zhang, Tong & Burke, Paul J., 2020. "The effect of fuel prices on traffic flows: Evidence from New South Wales," Transportation Research Part A: Policy and Practice, Elsevier, vol. 141(C), pages 502-522.
    4. Matsushima, Hiroshi & Khanna, Madhu, 2022. "Estimating Medium-run Direct Rebound Effects of the Footprint-based CAFE Standard," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322420, Agricultural and Applied Economics Association.
    5. Gustav Engström & Johan Gars & Niko Jaakkola & Therese Lindahl & Daniel Spiro & Arthur A. van Benthem, 2020. "What Policies Address Both the Coronavirus Crisis and the Climate Crisis?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 789-810, August.
    6. Tilov, Ivan & Weber, Sylvain, 2023. "Heterogeneity in price elasticity of vehicle kilometers traveled: Evidence from micro-level panel data," Energy Economics, Elsevier, vol. 127(PA).
    7. Kenneth Gillingham & Fedor Iskhakov & Anders Munk-Nielsen & John P. Rust & Bertel Schjerning, 2019. "Equilibrium Trade in Automobile Markets," NBER Working Papers 25840, National Bureau of Economic Research, Inc.
    8. Alberini, Anna & Horvath, Marco & Vance, Colin, 2022. "Drive less, drive better, or both? Behavioral adjustments to fuel price changes in Germany," Resource and Energy Economics, Elsevier, vol. 68(C).
    9. Craglia, Matteo & Cullen, Jonathan, 2020. "Do vehicle efficiency improvements lead to energy savings? The rebound effect in Great Britain," Energy Economics, Elsevier, vol. 88(C).
    10. Inge van den Bijgaart & David Klenert & Linus Mattauch & Simona Sulikova, 2024. "Healthy climate, healthy bodies: Optimal fuel taxation and physical activity," Economica, London School of Economics and Political Science, vol. 91(361), pages 93-122, January.
    11. Berry, Carl & Börjesson, Maria, 2024. "Income and fuel price elasticities of car use on micro panel data," Energy Economics, Elsevier, vol. 135(C).
    12. Alberini, Anna & Horvath, Marco & Vance, Colin, 2021. "Drive less, drive better, or both? Behavioral adjustments to fuel price changes in Germany," Ruhr Economic Papers 892, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. Harju, Jarkko & Kosonen, Tuomas & Laukkanen, Marita & Palanne, Kimmo, 2022. "The heterogeneous incidence of fuel carbon taxes: Evidence from station-level data," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    14. Sulikova, Simona & van den Bijgaart, Inge & Klenert, David & Mattauch, Linus, 2020. "Optimal fuel taxation with suboptimal health choices," Working Papers in Economics 794, University of Gothenburg, Department of Economics.
    15. Randall Wigle, 2019. "The Economic Case for EV Supports? Or: Network Effects, EV Pessimism and EV Supports," LCERPA Working Papers ec0123, Laurier Centre for Economic Research and Policy Analysis, revised 23 Oct 2019.
    16. Patrick Bigler & Doina Maria Radulescu, 2022. "Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles," CESifo Working Paper Series 9645, CESifo.
    17. Fanying Zheng & Fu Gu & Wujie Zhang & Jianfeng Guo, 2019. "Is Bicycle Sharing an Environmental Practice? Evidence from a Life Cycle Assessment Based on Behavioral Surveys," Sustainability, MDPI, vol. 11(6), pages 1-25, March.
    18. Börjesson, Maria & Asplund, Disa & Hamilton, Carl, 2023. "Optimal kilometre tax for electric vehicles," Transport Policy, Elsevier, vol. 134(C), pages 52-64.
    19. Frondel, Manuel & Marggraf, Clemens & Sommer, Stephan & Vance, Colin, 2021. "Reducing vehicle cold start emissions through carbon pricing: Evidence from Germany," Ruhr Economic Papers 896, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    20. Axsen, Jonn & Wolinetz, Michael, 2021. "Taxes, tolls and ZEV zones for climate: Synthesizing insights on effectiveness, efficiency, equity, acceptability and implementation," Energy Policy, Elsevier, vol. 156(C).
    21. Thomas Hagedorn & Till Kösters & Jan Wessel & Sebastian Specht, 2023. "No Need for Speed: Fuel Prices, Driving Speeds, and the Revealed Value of Time on the German Autobahn," Working Papers 39, Institute of Transport Economics, University of Muenster.

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    More about this item

    Keywords

    transportation; distributional effects; urban form; environmental taxes;
    All these keywords.

    JEL classification:

    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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