Equityanalysisoftradablecarbonpermitsforthepersonaltransportsector.docVIP

Equity analysis of tradable carbon permits for the personal transport sector Zia Wadud Robert B Noland Daniel J Graham Centre for Transport Studies Department of Civil and Environmental Engineering Imperial College London London SW7 2AZ, UK zia.wadud@imperial.ac.uk d.j.graham@imperial.ac.uk r.noland@imperial.ac.uk Abstract The personal road transport sector is one of the largest and fastest growing sources of CO2 emissions. This paper investigates a tradable permit policy for mitigating carbon emissions from personal road transport and discusses various issues of permit allocation. As tradable permits will effectively raise the price of fuel, the policy has important distributional implications. The distribution of burden depends on permit allocation strategies and on the consumer response to an increase in price. The behavioural response varies among different segments of the population depending on their travel needs, which in turn are contingent upon their income, location of residence and other factors. A model previously estimated by Wadud et. al. (2007) with group-wise aggregated US consumer expenditure survey data for 20 years provides behavioural responses for different income groups. The resulting welfare distribution is evaluated in this paper. Different permit allocation schemes are also considered in the analysis. Keywords: personal tradable carbon permits, fuel elasticity, equity, burden distribution, income distribution 1. Introduction Transport is the second biggest source of greenhouse gas emissions in the world. In 2001, the transport sector contributed 25% of total global CO2 emissions to the atmosphere (International Energy Agency, IEA 2004). Among these, the share from road transport is 80%, of which 60% is from personal road transport (IEA 2004). Thus the contribution of personal road transport to global CO2 emissions is approximately 12%. Road transport emissions are also growing at a faster rate than most other sectors. In 2003, trans