Impact Analysis on Gasoline Demand and CO2 Emissions of the Reduction in Expressway Toll, Free Expressways and Repeal of Temporary Tax on Gasoline

Author: 
Akira Yanagisawa
Description: 
Energy Data and Modelling Center Paper
JEL codes: 
Abstract: 
The toll on expressways is reduced as one of the economic stimulation packages of the Japanese government. The effect, however, is disputable. There are two competing views on the effect on gasoline demand and carbon dioxide (CO2) emissions, which is related to climate change. One is that this measure increases gasoline demand and CO2 emissions and another is that this measure decreases them. In this paper, the effect on gasoline demand and CO2 emissions of the reduction in expressways toll is analysed quantitatively using a gasoline demand model. Additionally, the effect on gasoline demand and CO2 emissions by free expressways and by a repeal of the temporary taxes on gasoline is estimated. The current reduction in expressways toll may seem not to lead to significant increase in gasoline demand due to the recession. It, however, is estimated that the reduction in toll actually increases gasoline demand by about 1.3% (0.8 GL per year, or 1.8 Mt of CO2 per year). If expressways become free of charge, gasoline demand is estimated to increase by about 7.2% (4.1 GL per year, or 9.6 Mt of CO2 per year). If the temporary taxes on gasoline are repealed and the taxes are reduced to the principal rates, gasoline demand is estimated to increase by about 3.1% (1.8 GL per year, or 4.1 Mt of CO2 per year). If both of these two measures are enforced, gasoline demand is estimated to increase by about 10.5% (6.0 GL per year, or 14 Mt of CO2 per year). In this case, CO2 emissions from the transport passenger sector are estimated to increase by about 10 Mt - 14 Mt depending on how much traffic will be shifted to passenger cars from other modes. This is equivalent to an increase of about 0.8% - 1.1% of Japans all greenhouse gases emission in the base year of the Kyoto Protocol (1990). Launch of consistent policies toward reduction of greenhouse gases emissions is more important now as the very severe emission target, reduction by 25% from 1990 level, has been announced even being premised on the formulation of a fair and effective international framework by all major economies and agreement on their ambitious targets.