Carbon Price Efficiency: Lock-In and Path Dependence in Urban Forms and Transport Infrastructure

26 Pages Posted: 20 Apr 2016

See all articles by Paolo Avner

Paolo Avner

CIRED, International Research Center on Environment & Development, France

Jun E. Rentschler

World Bank - Sustainable Development Network; University College London - Department of Economics

S. Hallegatte

World Bank

Date Written: June 1, 2014

Abstract

This paper investigates the effect of carbon or gasoline taxes on commuting-related CO2 emissions in an urban context. To assess the impact of public transport on the efficiency of the tax, the paper investigates two exogenous scenarios using a dynamic urban model (NEDUM-2D) calibrated for the urban area of Paris: (i) a scenario with the current dense public transport infrastructure, and (ii) a scenario without. It is shown that the price elasticity of CO2 emissions is twice as high in the short run if public transport options exist. Reducing commuting-related emissions thus requires lower (and more acceptable) tax levels in the presence of dense public transportation. If the goal of a carbon or gasoline tax is to change behaviors and reduce energy consumption and CO2 emissions (not to raise revenues), then there is an incentive to increase the price elasticity through complementary policies such as public transport development. The emission elasticity also depends on the baseline scenario and is larger when population growth and income growth are high. In the longer run, elasticities are higher and similar in the scenarios with and without public transport, because of larger urban reconfiguration in the latter scenario. These results are policy relevant, especially for fast-growing cities in developing countries. Even for cities where emission reductions are not a priority today, there is an option value attached to a dense public transport network, since it makes it possible to reduce emissions at a lower cost in the future.

Keywords: Transport Economics Policy & Planning, Climate Change Mitigation and Green House Gases, Climate Change Economics, Transport in Urban Areas, Transport and Environment

Suggested Citation

Avner, Paolo and Rentschler, Jun E. and Hallegatte, Stephane, Carbon Price Efficiency: Lock-In and Path Dependence in Urban Forms and Transport Infrastructure (June 1, 2014). World Bank Policy Research Working Paper No. 6941, Available at SSRN: https://ssrn.com/abstract=2458729

Paolo Avner

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France

Jun E. Rentschler

World Bank - Sustainable Development Network ( email )

United States

University College London - Department of Economics

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Stephane Hallegatte

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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