Abstract:
This study applies a discrete-continuous cohort model to US vehicle purchase decisions and
personal travel demand to describe the environmental and economic effects of a federal carbon
policy. The transportation sector is currently culpable for one third of total US CO2 emissions
and the increase in these emissions is growing at a rate faster than the emissions from all US
sources. One mechanism that may be capable of stabilizing or reducing CO2 emissions in the
transportation sector is to place a tax on carbon-emitting motor fuel. We calculate the impact of
such a policy on the transportation sector by simulating both personal travel demand and
discrete vehicle choice using Matlab. We find that such a tax will reduce the consumption of
fuel, demand for vehicle miles traveled, and carbon emissions. Also, as a result of the tax,
market shares of more efficient cars increase.
