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Automobile fuel efficiency policies with international innovation spillovers

Author

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  • Philippe Barla
  • Stef Proost

Abstract

In this paper, we explore automobile fuel efficiency policies in the presence of two externalities i) a global environmental problem and ii) international innovation spillovers. Using a simple model with two regions, we show that both a fuel tax and a tax on vehicles based on their fuel economy rating are needed to decentralize the first best. We also show that if policies are not coordinated between regions, the resulting gas taxes will be set too low and each region will use the tax on fuel rating, to reduce the damage caused by foreign drivers. If standards are used instead of taxes, we find that spillovers may alleviate free-riding. Under some conditions, a strict standard in one region may favour the adoption of a strict standard in the other one.

Suggested Citation

  • Philippe Barla & Stef Proost, 2008. "Automobile fuel efficiency policies with international innovation spillovers," Working Papers of Department of Economics, Leuven ces0817, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces0817
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    File URL: https://lirias.kuleuven.be/bitstream/123456789/185874/1/DPS0817.pdf
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    Cited by:

    1. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.

    More about this item

    Keywords

    Environmental policy; automobile; fuel efficiency standard; gasoline tax; innovation spillovers;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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