Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions? / Don Fullerton, Sarah West.

Format:

Book

Author/Creator:

Fullerton, Don.

Contributor:

National Bureau of Economic Research.

West, Sarah.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7059.

NBER working paper series no. w7059

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

A tax on vehicle emissions can efficiently induce all of the cheapest forms of abatement. Consumers could drive less, buy a smaller car with better gas mileage, use cleaner gasoline, and repair pollution control equipment (PCE). However, the technology is not yet available to measure and tax each car's total emissions. We thus investigate alternative instruments. In a simple model with identical consumers, we show conditions under which the same efficiency can be attained by the combination of a tax on gas, a tax on engine size , and a subsidy to PCE. In a model with heterogeneous consumers, the same efficiency can again be obtained, but only if each person's gasoline tax rate can be made to depend on the characteristics of the car. We solve for these first-best tax rates. Assuming that tax rates must be uniform across consumers, we then characterize second-best tax rates on gasoline and on characteristics.

Notes:

Print version record

March 1999.