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Public Finance Solutions to Vehicle Emissions Problems in California
  • Don Fullerton, University of Texas at Austin
  • Sarah E. West, Macalester College
All urban centers in California violate the Federal standard for ozone. So far, the State has addressed vehicle emission problems with a variety of mandates. In contrast, economic theory suggests that costs of achieving air quality can be minimized by the use of incentive policies such as permits, taxes, or subsidies. The purpose of the research described in this monograph is to explore incentive programs that might be added to the State’s repertoire of effective vehicle pollution reduction policies. The monograph is not very technical in nature, but it explains our theoretical approach, numerical simulation model, and statistical estimation. We find that a single rate of tax on emissions is most efficient. A vehicle-specific gas tax or a miles-specific vehicle tax can attain the same efficient outcome. Uniform rates that incorporate heterogeneity are "second-best". A combination of three uniform rates can attain 71 percent of the gain from the emissions tax. A gas tax alone can attain 62 percent of the emissions tax gain. A subsidy to new vehicles would be regressive. A tax on gasoline is not regressive across the lowest incomes but is regressive from middle to high incomes.
Publication Date
Citation Information
Don Fullerton and Sarah E. West. Public Finance Solutions to Vehicle Emissions Problems in California. Berkeley CA(2003)
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