Tiered Gasoline Pricing: A Personal Carbon Trading Perspective

Yao Li, Jin Fan, Dingtao Zhao, Yanrui Wu and Jun Li
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Yao Li: School of Management, University of Science and Technology, China
Jin Fan: School of Management, University of Science and Technology, China
Dingtao Zhao: School of Management, University of Science and Technology, China
Jun Li: School of Management, University of Science and Technology, China

No 16-02, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: This paper proffers a tiered gasoline pricing (TGP) method from a personal carbon trading (PCT) perspective. An optimization model of personal carbon trading is proposed, and then, an equilibrium carbon price is derived according to the market clearing condition. Based on the derived equilibrium carbon price, this paper proposes a calculation method of tiered gasoline pricing. Then, sensitivity analyses and consumers’ surplus analyses are conducted. It can be shown that a rise in gasoline price or a more generous allowance allocation would incur a decrease in the equilibrium carbon price, making the first tiered price higher, but the second tiered price lower. It is further verified that the proposed tiered pricing method is progressive because it would relieve the pressure of the low-income groups who consume less gasoline while imposing a greater burden on the high-income groups who consume more gasoline. Based on these results, implications, limitations and future studies are provided.

Pages: 38 pages
Date: 2016
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (5)

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