Decentralized transferable permit systems in the transport sector can be of interest with regard to reducing greenhouse gas emissions, in spite of anticipated transaction costs. This paper describes a potential application of a domestic market for car fuel consumption permits. The marginal costs of consumption reduction vary sufficiently according to motorists' residential locations to consider permit exchanges. Economic evaluation of this system shows that there are transfers of surplus between the various groups of motorists according to their residential locations. The central government may lose significant revenues when compared with a conventional fuel tax. Lastly, the issue of transaction costs, the benefits and disadvantages in terms of social acceptability and equity are discussed.
AcknowledgementsThis paper is based on a research conducted with the support of the CNRS (Centre National de la Recherche Scientifique) and funded by the French Ministry of the Environment. We would also like to thank our colleague Dominique Bouf for his helpful comments on an earlier version of this paper. However views expressed here are solely the authors' ones.
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