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Vehicle Fuel-Efficiency Choices, Emission Externalities, and Urban Sprawl

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  • Kim, Jinwon

Abstract

This paper shows that a city where both a congestion externality and an externality from greenhouse gas emissions are corrected by efficient policies is more compact than the laissez-faire equilibrium city. Motivated by recent empirical studies showing a positive relationship between population density and vehicle fuel-efficiency, the consumer is assumed to choose vehicle fuel-efficiency jointly with housing consumption and residential location. By incorporating the consumer's vehicle choice into the urban spatial model, we can represent the total amount of vehicle emissions released by the city residents. We first establish the well-known result that the congestion externality as a source of market failure is associated with excessive urban sprawl. We then show that vehicle emissions are an additional source of market failure, which also leads to excessive urban sprawl. The source of excessive sprawl arising from the emission externality is the use of larger and less-fuel efficient vehicles in more sprawled cities, which is different from that of the congestion externality. We also analyze the effect of the Corporate Average Fuel Economy (CAFE) standards on urban spatial structure and its efficacy as a second-best tool for correcting the emission externality.

Suggested Citation

  • Kim, Jinwon, 2015. "Vehicle Fuel-Efficiency Choices, Emission Externalities, and Urban Sprawl," MPRA Paper 66922, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:66922
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    References listed on IDEAS

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    Cited by:

    1. Waldemar Marz, 2019. "Komplexitätsdimensionen von Klimapolitik: Die Rolle von politischer Ökonomie, Kapitalmärkten und der Stadtform," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 85.
    2. Fosgerau, Mogens & Kim, Jinwon, 2019. "Commuting and land use in a city with bottlenecks: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 182-204.
    3. Waldemar Marz & Frank Goetzke, 2019. "CAFE in the City – A Spatial Analysis of Fuel Economy Standards," ifo Working Paper Series 292, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    More about this item

    Keywords

    urban sprawl; vehicle fuel-efficiency; emission externality; congestion;

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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