Measuring Market Damage of Automobile Related Carbon Tax by Dynamic Computable General Equilibrium model

This paper provides the political evaluation of automobile related carbon tax to control CO2 emissions caused by automobiles. In Japan, the Ministry of Transport presented the target to bring the increasing rate of the CO2 emissions in the transport sector fewer than 17% from 1990 level. We computed the carbon tax needed to accomplish its target by the dynamic computable general equilibrium (DCGE) model. In the DCGE model, the economic activities of households or industries are formulated by mathematical economic model, so we are able to grasp market disbenefits generated from the change of economic activities as well as the regulated volume of the CO2 emissions. The market disbenefits are called by deadweight loss, and we computed those value amounts by the concept of equivalent variation. The CGE approaches have been developed to evaluate economic impacts of the change of taxation or international trade policy, which are surveyed by Shoven and Whalley (1984). Recently, the CGE models to compute general equilibrium effects of environmental policies have been proposed by Jorgenson and Wilcoxen (1990), Bergman (1991), Ballard and Medema (1993) and Zhang (1998), and so on. And the CGE approaches have been extended to the dynamic analysis, in order to measure the environmental effects or economic influences in the point of long-term for environmental problems. The DCGE model, built in this research, follows those previous CGE approaches in principle. We modeled, however, the automobile related industrial or transport sector?s behavior and household travel behavior in full. Especially, the travel behavior for private tips of household is formulated by the probability choice paradigm shown by McFadden. By using this DCGE model, we simulated the automobile related carbon tax needed to accomplish the target in the transport sector. At this simulation, we afraid that the fuel price elasticity might give a lot of impacts to the simulation results. So we executed the sensitivity analysis by giving the fuel price elasticity of two patterns. At the case of fuel price elasticity 0.1, the automobile related carbon tax is calculated by 0.11[million yen/tC] and the market disbenefit is evaluated by 0.16[billion yen/year]. Next, at the case of fuel price elasticity 0.3, the carbon tax is 0.114[million yen/tC] and the market disbenefit is 0.2[billion yen/year].