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

Author

Listed:
  • Ivaldi, Marc
  • Cherbonnier, Frédéric
  • 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

  • Ivaldi, Marc & Cherbonnier, Frédéric & Muller-Vibes, Catherine & Van Der Straeten, Karine, 2025. "Welfare Implications of a Carbon Tax in a Long-Distance Passenger Market," TSE Working Papers 25-1656, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:130752
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    References listed on IDEAS

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    1. Moshe Givoni & Frédéric Dobruszkes, 2013. "A Review of Ex-Post Evidence for Mode Substitution and Induced Demand Following the Introduction of High-Speed Rail," ULB Institutional Repository 2013/152140, ULB -- Universite Libre de Bruxelles.
    2. Marc Ivaldi & Catherine Vibes, 2008. "Price Competition in the Intercity Passenger Transport Market: A Simulation Model," Journal of Transport Economics and Policy, University of Bath, vol. 42(2), pages 225-254, May.
    3. Cherbonnier Frédéric & Ivaldi Marc & Muller-Vibes Catherine & Van Der Straeten Karine, 2017. "Competition For Versus In the Market of Long-Distance Passenger Rail Services," Review of Network Economics, De Gruyter, vol. 16(2), pages 203-238, June.
    4. Brueckner, Jan K. & Zhang, Anming, 2010. "Airline emission charges: Effects on airfares, service quality, and aircraft design," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 960-971, September.
    5. Gollier, Christian, 2018. "The cost-efficiency carbon pricing puzzle," TSE Working Papers 18-952, Toulouse School of Economics (TSE), revised May 2024.
    6. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    7. Christian Gollier, 2024. "The cost-efficiency carbon pricing puzzle," Post-Print hal-04938709, HAL.
    8. Adler, Nicole & Pels, Eric & Nash, Chris, 2010. "High-speed rail and air transport competition: Game engineering as tool for cost-benefit analysis," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 812-833, August.
    9. Wang, Yingzhi & Jiang, Xiushan & Ma, Jihui, 2025. "Emissions reduction of air transport and high-speed rail with policy intervention considering the modal competition in a network market: Environment and welfare implications," Transport Policy, Elsevier, vol. 162(C), pages 379-395.
    10. Moshe Givoni & Frédéric Dobruszkes, 2013. "A Review of Ex-Post Evidence for Mode Substitution and Induced Demand Following the Introduction of High-Speed Rail," Transport Reviews, Taylor & Francis Journals, vol. 33(6), pages 720-742, November.
    11. Gollier, Christian, 2024. "The cost-efficiency carbon pricing puzzle," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
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    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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