Regulating CO2 Emissions of Transportation in Europe: A CGE-Analysis Using Market-Based Instruments
14 Pages Posted: 14 Jun 2009
Date Written: June 11, 2009
This paper analyzes the use of market-based emission regulation instruments to address the carbon dioxide emissions of transportation. Simulations with a static multi region computable general equilibrium model show that including transportation into the European emission trading system is superior to a closed emission trading system for transportation or a tax-based approach. Furthermore, we show that exempting transportation from emission regulation is the most favorable approach in terms of welfare. This result is due to a large tax interaction effect caused by high pre-existing fuel taxes in the transport sector.
Keywords: Transportation, Carbon Regulation, Emission Trading, Computable General Equilibirum
JEL Classification: D58, L91, Q51
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