I found a paper, by economists Ian Parry and Kenneth Small, that discusses optimal gasoline tax rates. The paper is very technical, but I think I was able to glean something useful from Table 5. The paper estimates the external cost of four problems with cars: Global warming, pollution, accidents, and congestion. They respectively contribute: 5¢, 16¢, 24¢, and 29¢ to the optimal gasoline tax. The United States consumed 126 billion liters of gasoline in 2003. Thus, if I understand the paper correctly the external cost of global warming is $6 billion, pollution $20 billion, accidents $30 billion, and congestion $37 billion, for a total of $93 billion.
I will have to dive deeper into the paper to dive deeper into the paper to be confident that my understanding is correct. Hopefully, I can find an economics graduate student at Carnegie Mellon willing to help me out.
This paper seems to have a very right leaning slant. I think its primary political purpose is to argue that the gasoline tax in Britain is too high. However, Greg Mankiw, an American economist, uses it as a source to advocate raising the tax on gasoline in the United States.
Do you know of any other papers that estimate the economic cost of cars? If you do, please post a comment with links.
Links: Ian Parry and Kenneth Small | Greg Mankiw | Gasoline Consumption by Country
1 comments:
I think these numbers are low.
My expertise is on the ecological side, so I am only qualified to comment on those numbers.
Please note that the authors use William Nordhaus' numbers for global warming. Nordhaus is an arch conservative on global warming economics, with notable stances' against the Stern report and 4th edition IPCC figures.
The IPCC projections are "In 2050, global average macro-economic costs for mitigation towards stabilisation between 710 and 445ppm CO2-eq are between a 1% gain and 5.5% decrease of global GDP (Table SPM.7)."
Similarly, the pollution component of the paper only considers air pollution. They justify this with a footnote "Virtually all quantitative estimates of external costs of motor vehicles have placed these three at the top of the list, in magnitude far above such other candidates as noise, water pollution, vehicle and tire disposal, policing needs, pavement damage, and security of national petroleum supplies."
I'm not comfortable with this comment. Commodities such as water are underpriced in most markets. While the costs of air pollution may be more explicit at this time, the costs of water pollution may be larger over the long term.
The authors take a market based approach without considering that there are many ecosystem products that markets do not price in correspondence to their actual value. Using this approach to tax gasoline is a potential pitfall to their argument.
Look at the working papers put out by the center for sustainable systems at the university of michigan.
here
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