• Graduate program
    • Why Tinbergen Institute?
    • Program Structure
    • Courses
    • Course Registration
    • Facilities
    • Admissions
    • Recent PhD Placements
  • Research
  • News
  • Events
    • Summer School
      • Summer School
      • Behavioral Macro and Complexity
      • Climate Change
      • Econometrics and Data Science Methods for Business, Economics and Finance
      • Networks in Micro- and Macroeconomics
      • Business Data Science Summer School Program
    • Events Calendar
    • Events Archive
    • Tinbergen Institute Lectures
    • Conference: Consumer Search and Markets
    • Annual Tinbergen Institute Conference
  • Summer School
  • Alumni
  • Times
Home | Events | The Gasoline Climate Trap
Seminar

The Gasoline Climate Trap


  • Location
    Woudestein campus, lounge/kitchen E Building floor E1
    Rotterdam
  • Date and time

    March 30, 2023
    12:00 - 13:00

Abstract

Due to taxes and subsidies, gasoline prices vary dramatically across countries. Externalities cannot fully explain differences in gasoline taxes. 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. The model has two equilibria: a low-tax equilibrium, in which a majority of citizens own a big car, and a high-tax equilibrium, in which a majority of citizens own a small or no car. Though distributional motives help to explain gasoline taxes, these taxes are not necessarily progressive. 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 an equilibrium with a high gasoline tax.