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Is it environmentally desirable to encourage public transport through taxes? Evidence for Spanish households

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  • Desiderio Romero-Jordán
  • José Félix Sanz
  • Mercedes Burguillo

Abstract

There are studies that suggests that the use of environmental taxes to promote the consumption of "clean goods" could have unwanted effects in that it leads to the consumption of "dirty goods". The results will depend on the multiple effects of cross-price elasticities. This paper illustrates the above hypothesis as applied to earth transport consumption in Spanish households. Using microdata for Spanish households, we firstly estimate an AIDS model for 16 groups of goods and services. And secondly simulate two alternative revenue-neutral tax reforms in which the relative price of public transport, in terms of private transport, is reduced between 1 and 2%. The results confirm Sandmo's hypothesis. With both reforms, fuel consumption (as measure of private transport use) increases and public transport consumption decreases. The consequence in each case is a net increase in CO 2 emissions per household. So, fiscal reforms of this kind do not seem to be effective to improve the environmental performance of passengers earth transport sector in Spain.

Suggested Citation

  • Desiderio Romero-Jordán & José Félix Sanz & Mercedes Burguillo, 2014. "Is it environmentally desirable to encourage public transport through taxes? Evidence for Spanish households," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-9, December.
    • Handle: RePEc:taf:oaefxx:doi:10.1080/23322039.2014.946999
    DOI: 10.1080/23322039.2014.946999
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    1. Bakhat, Mohcine & Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "Elasticities of transport fuels at times of economic crisis: An empirical analysis for Spain," Energy Economics, Elsevier, vol. 68(S1), pages 66-80.

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