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Comparison of Economic Impacts Across Local Emission Regulations

  • Journal of Regulation Studies
  • 2005, 14(1), pp.135-178
  • Publisher : 한국규제학회
  • Research Area : Social Science > Public Administration

Kim, Youngduk 1,  조경엽 2

1부산대학교
2국회예산정책처

Candidate

ABSTRACT

This paper investigates policy difference between a market-based environmental policy such as emission trading and a command and control policy such as fuel quality standard. For this, we construct a CGE model allowing various vehicles, fuels, and transportation service options. Especially, choices that consumers face in the model consist of ① new vehicle & existing fuel ② new vehicle & low sulphur fuel ③ existing vehicle & existing fuel ④ existing vehicle & low sulphur fuel. Also, we divide the vehicles into three types(passenger car, bus and truck), two sizes(small and big) and two vintages(new and existing), and classify the fuels into three types(gasoline, diesel and LPG). This classification allows us to analyze not only the substitution effect across the existing vehicles but also the substitution effect between the new and the existing vehicles. We use the CGE model to compare the economic impacts on GDP between command-and-control (CAC) and market-based policy. It shows that the market-based policy is superior to the CAC to minimize GDP loss in achieving a environmental target. Also, it shows that tax recycling mechanism is preferable to mitigate GDP loss in the presence of the existing tax distortion. Moreover, it is found that, under the market-based policy such as emission trading, the high quality standard fuel can be penetrated through markets without introducing any other regulation.

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