IPCC finds taxes, regulations mix most effective for vehicle emissions reductions

By Chet Edelman
According to the recent report released by the UN Intergovernmental Panel on Climate Change, a mere 1.5 degree Celsius rise in mean global temperature will unleash climate devastation on a unprecedented scale. The report stresses that avoiding the worst effects of climate change will require immediate reductions in CO2 across all sectors of the economy including transportation. As it stands, transportation accounts for about 23 percent of global energy-related CO2 emissions—74 percent of which can be attributed to road transport. A new study by researchers at the Wuppertal Institute for Climate, Environment, and Energy finds that in order to achieve needed reductions in vehicle-based CO2 emissions, a combination of both market-based and regulatory policies must be adopted worldwide. Furthermore, the authors find that no one singular policy, even when implemented to the extreme, can achieve reductions equivalent to several policies combined.
In the United States, transportation is the single largest carbon-producing economic sector. Moreover, it is the only sector where emissions are currently rising—a trend that is attributed to falling fuel prices and a growing economy. Similar to other developed countries, the U.S. currently has several policies in place to reduce gas consumption and decrease CO2. In their study, the authors focus on three of the most widely implemented and common polices globally: 1) emissions standards for new vehicles; 2) vehicle purchase or ownership taxes; and 3) fuel taxes. Each of these policies varies with respect to a regulatory or market-based approach. For example, emissions standards for new vehicles are typically viewed as a purely regulatory approach that aims to forcibly change car manufacturer standards. Fuel taxes and car taxes, on the other hand, employ market-based incentives to target consumer behavior and to make CO2 emitting more costly.
To evaluate their effectiveness, the study examined each policy’s impact on reducing vehicle-based CO2 emissions in different G20 countries. Overall, the authors found a positive relationship between the total financial impacts of CO2-based vehicle policy measures and reductions in CO2 levels by a country’s car fleet. In other words, policies that made emitting CO2 more costly were likely to have the greatest impact in reducing vehicle CO2 emissions.
Additionally, the authors found that, in isolation, no single policy was as effective in achieving reductions as several of the policies in combination. This held true even when an individual policy was taken to the extreme. In a sense, the study revealed that when it comes to vehicle emissions reductions, there is no single clear-cut policy choice that can be easily implemented. Rather, there are several different polices that must be adopted in combination to encourage increased vehicle fuel efficiency and reduced vehicle miles traveled.
The IPPC report stresses that as of now, a 12-year window exists in which to implement the reforms necessary to mitigate the worst effects of climate change. Considering the outsized role transport—especially vehicle travel—plays in contributing to global CO2 emissions, comprehensive polices that use both regulatory and market-based approaches are critical if the transportation sector is to meet reduction goals. However, as the IPPC report also emphasizes, strategies singularly aimed at vehicles will not be entirely sufficient. Policy efforts and reforms must also address issues of land use and alternative modes of transportation to achieve meaningful reductions in CO2. While there may not be one fix-all solution for reducing transportation’s carbon footprints, there are still meaningful steps that policymakers at all levels of government can take to limit the impacts of climate change.
Chet Edelman is a Project Assistant at SSTI.