Private Transport and the European Emission Trading System: Revenue Recycling, Public Transport Subsidies, and Congestion Effects

22 Pages Posted: 24 May 2011

See all articles by Jan Abrell

Jan Abrell

ETH Zürich - Centre for Energy Policy and Economics (CEPE)

Date Written: May 17, 2011

Abstract

From 2012 onwards, the European Emission Trading System regulates the carbon emissions of electricity generation, refineries, energy intensive production, and aviation. Beside the fuel efficiency regulation of cars, there exists no European approach of carbon regulation in the private transport sectors. However, half of the income of allowance auctioning has to be used for implementing environmental improving policies including public transport subsidies. Using a Computable General Equilibrium model of the German economy, we show that exempting transport from carbon pricing but recycling revenues via public transport subsidies is welfare enhancing. By including congestion effects into the model we show that such a recycling scheme has the potential of negative gross cost of carbon regulation by reducing congestion and global pollution externalities.

Keywords: Transport, carbon regulation, European emission trading system, public transport

JEL Classification: D58, H23, Q58, R41

Suggested Citation

Abrell, Jan, Private Transport and the European Emission Trading System: Revenue Recycling, Public Transport Subsidies, and Congestion Effects (May 17, 2011). Available at SSRN: https://ssrn.com/abstract=1844300 or http://dx.doi.org/10.2139/ssrn.1844300

Jan Abrell (Contact Author)

ETH Zürich - Centre for Energy Policy and Economics (CEPE) ( email )

8092 Zurich
Switzerland

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