The Optimal Gasoline Tax for China
- 1 Department of Agricultural and Resource Economics, University of California at Davis, Davis, USA
- 2 Department of Agricultural and Resource Economics, University of California at Davis, Davis, USA
Abstract
Gasoline-powered vehicles produce many negative externalities including congestion, air pollution, global climate change, and accidents. A gasoline tax is perhaps the best policy to jointly address these externalities. This paper calculates the optimal gasoline tax for China. Using a model developed by Parry and Small [1] 08D0C9EA79F9BACE118C8200AA004BA90B02000000080000000E0000005F005200650066003300380035003600300030003200350032000000 [2] 08D0C9EA79F9BACE118C8200AA004BA90B02000000080000000E0000005F005200650066003300380035003600300030003200350036000000 , we calculate the optimal adjusted Pigovian tax in China to be $1.58/gallon which is 2.65 times more than the current level. Of the externalities incorporated in this Pigovian tax, the congestion costs are taxed the most heavily, at $0.82/gallon, followed by local air pollution, accident externalities, and finally global climate change.
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