Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?

30 Pages Posted: 10 Dec 2006 Last revised: 29 Oct 2013

Date Written: December 1, 2006

Abstract

Energy models suggest that the cost of reducing carbon emissions from the transportation sector is high relative to other sectors, such as electricity generation. However, this paper shows that taxes to reduce passenger vehicle emissions produce large net benefits, rather than costs, when account is taken of: (a) their impact on reducing non-carbon externalities from passenger vehicle use, and (b) interactions with the broader fiscal system. Both of these considerations also strengthen the case for using a tax-based approach to reduce emissions over fuel economy regulation, while fiscal considerations strengthen the case for taxes over (non-auctioned) emissions permits.

Keywords: carbon policies, passenger vehicles, externalities, welfare costs

JEL Classification: Q54, R48, H23

Suggested Citation

Parry, Ian W. H., Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative? (December 1, 2006). RFF Discussion Paper No. 06-14, Available at SSRN: https://ssrn.com/abstract=950519 or http://dx.doi.org/10.2139/ssrn.950519

Ian W. H. Parry (Contact Author)

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