Equity Implications of Carbon Rationing in the Personal Road Transport Sector

Transcription

1 Equity Implications of Carbon Rationing in the Personal Road Transport Sector Zia Wadud & Robert Noland Centre for Transport Studies Imperial College London October 2005

2 Objective To investigate the distribution of burden in the society as a result of carbon rationing or tradable carbon permit policy in the personal transport sector Equity implications of carbon rationing in the personal road transport sector 2

3 Background Transport emits 20% of global CO2 emissions Personal road transport 10% of global CO2 Personal road transport 2 nd biggest source (20%) of GHG emissions in the US Biggest growth area (2.1% annually) Requires special attention but how to manage reductions? Equity implications of carbon rationing in the personal road transport sector 3

4 Policy Options : EEE Command and control Emission limits Standards and labelling Market based policies Emission taxes Tradable emission permits > InEfficient > Efficient Equity?? Equity implications of carbon rationing in the personal road transport sector 4

5 Carbon Rationing Design First proposed by Starkey & Flaming (1999) Advocated by Raux et al (2005) in transport sector Fixed amount of carbon permits, allocated to each person Trade between persons if excess/shortage, through ATMs, retail top-up shops, post offices etc. Equity implications of carbon rationing in the personal road transport sector 5

6 Equity issues Price increases Different burden on different groups Regressive in general P2 P1 Demand elasticity an important determinant Q2 Q Q1 Equity implications of carbon rationing in the personal road transport sector 6

7 The Model Gasoline demand model for different income groups, from 20 year CEX summary data, SUR model, log-log specification Determining price from aggregate demand curve, for a chosen reduction Modelling CS/CV, based on elasticities, 2003 CEX data P2 P1 Q2 Q Q1 Equity implications of carbon rationing in the personal road transport sector 7

8 The Model 4 different measures of welfare loss: Consumer surplus, same elasticity for all groups Consumer surplus, different elasticity for different groups Compensating variation, different elasticity for different groups Consumer surplus, no demand response 3 different allocation scheme All gets equal credit Only adults get credit Adults get one unit, children (below 18) get 0.5 units Equity implications of carbon rationing in the personal road transport sector 8

9 Results: Gasoline demand modelling Gasoline demand elasticity with respect to income and price: SUR: log- log specification Poorest quintile Second quintile Third quintile Fourth quintile Fifth quintile Income Price Equity implications of carbon rationing in the personal road transport sector 9

10 Welfare gain per household (US$) Results: Welfare change for a 15% reduction in Carbon consumer surplus-same elasticity -450 consumer surplus-different elasticity compensating variation-different elasticity no demand response -550 National Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile US$14762 US$28595 US$47802 US$77671 Equity implications of carbon rationing in the personal road transport sector 10

11 Welfare gain/income ratio per household Results: Welfare change/income for 15% reduction in Carbon consumer surplus-same elasticity consumer surplus-different elasticity compensating variation-different elasticity no demand response National Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile US$14762 US$28595 US$47802 US$77671 Equity implications of carbon rationing in the personal road transport sector 11

12 Welfare gain/income ratio per household Results: Effect of different allocation units adult only all equal adult + children half National Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile US$14762 US$28595 US$47802 US$77671 Equity implications of carbon rationing in the personal road transport sector 12

13 Conclusion Gasoline demand elasticities vary for different income groups, and thus have effect on equity No demand response understates welfare loss Rationing with trading not as regressive as suggested by many gasoline tax literature Progressivity can be optimised by altering the combination of allocation units Further research on subsidy option Equity implications of carbon rationing in the personal road transport sector 13

14 Feedback/Questions? Thank you Equity implications of carbon rationing in the personal road transport sector 14