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Welfare Implications of a Carbon Tax in a Long-Distance Passenger Market

Author

Listed:
  • Cherbonnier, Frédéric
  • Ivaldi, Marc
  • Muller-Vibes, Catherine
  • Van Der Straeten, Karine

Abstract

This study estimates the impact of a carbon tax on welfare, considering modal shifts to less carbon-intensive transport, as well as its effects on environmental and fiscal externalities. We calibrate a modal competition model using logit demand functions for a specific long-distance connection in France and simulate the introduction of a Pigouvian tax. Our key findings are: First, a €190/tCO2 carbon tax is nearly welfare-neutral but significantly detrimental to consumer surplus; Second, rail price regulation has the side effect of reducing greenhouse gas emissions by subsidizing the cleanest transport mode; Third, the widespread adoption of electric vehicles enhances overall welfare without significantly harming consumer surplus.

Suggested Citation

  • Cherbonnier, Frédéric & Ivaldi, Marc & Muller-Vibes, Catherine & Van Der Straeten, Karine, 2025. "Welfare Implications of a Carbon Tax in a Long-Distance Passenger Market," CEPR Discussion Papers 20515, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20515
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    File URL: https://cepr.org/publications/DP20515
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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