Environmental Pricing in Transport

Edward Caltrhop (edward.calthrop@jesus.ox.ac.uk) and Stef Proost

Energy, Transport and Environment Working Papers Series from KU Leuven, Department of Economics - Research Group Energy, Transport and Environment

Abstract: Transport activity is inextricably linked with environmental damage. Economists traditionally urge policy makers to adopt pricing solutions, in particular taxes, to reduce environmental damage rather than quantity restrictions or standards. This chapter examines environmental pricing, defined broadly to include emission taxes, product taxes and subsidies and compares it to alternative approaches. We begin with a simple formal model to demonstrate the relative efficiency properties of pricing solutions, before highlighting some of the associated implementation problems. We then extend the scope and realism of the analysis by examining the choice between regulatory instruments in the presence of several market distortions. The basic case for environmental taxes, set at the correct level, is shown to remain. It is impossible to cover all modes and all real world case studies of pricing in this text. Rather, we illustrate our central point in the context of air pollution from car use. However, as we stress in the concluding section, the essential insight from the model applies to a whole range of enviromental problems in the transport sector. Readers interested in surveys of practical experiences are referred to The Policy Issues chapters of Handbook 6. A general introduction to the choice of regulatory instruments to tackle environmental damage can be found in Kolstad (1999).

Keywords: Transport; environment; emission taxes (search for similar items in EconPapers)
Pages: 18 pages
Date: 2002-09
New Economics Papers: this item is included in nep-ene, nep-env, nep-lam and nep-ure
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Citations: View citations in EconPapers (2)

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