Optimal environmental policy in transport: unintended effects on consumers generalized price

Abstract

Transport activity is strongly linked to environmental damage. However, transport oper-ators may reduce their pollutant emissions through abatement effort. The government can make use of several instruments to increase the transport service operator’s abatement effort, such as emissions taxes, emission subsidies or technological standards. All these instruments induce different effects on the number of operations to be offered and on the overall dis-tortions of the economy. The optimal ranking of policies may strongly depend on whether regulators consider or not the effect that frequency has on consumers’ generalized price. Thus, the main purpose of this paper is to highlight the importance of such an effect on regulation policies.