Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2023-05-08
Number: 23-025/VII
Author-Name: Josse Delfgaauw
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Otto Swank
Author-Workplace-Name: Erasmus University Rotterdam
Title: The Gasoline Climate Trap
Abstract: Due to taxes and subsidies, gasoline prices vary dramatically across countries. Externalities cannot fully account for this. We develop a simple political-economic model that shows that group interests, resulting from the composition of a
country’s car fleet, help to explain differences in gasoline taxes even among countries
with identical fundamentals. In the model, citizens’ car ownership is endogenous,
which can yield multiple equilibria. Our model demonstrates the possibility of a society in a climate trap where a low gasoline tax reflects the views of a majority, but
another majority would benefit from transitioning to an equilibrium with a higher
gasoline tax and fewer emissions. 
Classification-JEL: D62, D72, H23, Q58
Keywords: median voter, gasoline taxes, multiple equilibria.
File-URL: https://papers.tinbergen.nl/23026.pdf
File-Format: application/pdf
File-Size: 278.419 bytes
Handle: RePEc:tin:wpaper:20230026