Cost-Effective Policies to Reduce Vehicle Emissions

13 Pages Posted: 30 Mar 2005 Last revised: 15 Jul 2010

See all articles by Don Fullerton

Don Fullerton

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Li Gan

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2005

Abstract

This paper uses an estimated demand system that accounts for heterogeneity to calculate and compare the lost consumer surplus from a higher tax on gasoline, a tax on distance, or a subsidy for buying a newer car. We introduce a view of cost-effectiveness that compares policies instead of technologies. Each tax might induce some consumers to drive less, some to switch from two vehicles to one, and some to buy a car instead of an SUV. Our model captures these behaviors. For each rate of tax, we simulate the changes in all such choices and how the new choices affect emissions. We also calculate the equivalent variation and subtract tax revenue to get deadweight loss. Finally, we take the added deadweight loss over the additional abatement as the social marginal cost of abatement, and we plot this curve for several different tax policies.

Suggested Citation

Fullerton, Don and Gan, Li, Cost-Effective Policies to Reduce Vehicle Emissions (March 2005). NBER Working Paper No. w11174. Available at SSRN: https://ssrn.com/abstract=679333

Don Fullerton (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
(217) 244-3621 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Li Gan

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
51
Abstract Views
782
rank
379,790
PlumX Metrics