An Analysis of Various Policy Instruments to Reduce Congestion, Fuel Consumption and CO2 Emissions in Beijing

Using a nested multinomial logit model
of car ownership and personal travel in Beijing circa 2005,
this paper compares the effectiveness of different policy
instruments to reduce traffic congestion and CO2 emissions.
The study shows that a congestion toll is more efficient
than a fuel tax in reducing traffic congestion, whereas a
fuel tax is more effective as a policy instrument for
reducing gasoline consumption and emissions. An improvement
in car efficiency would also reduce congestion, fuel
consumption, and CO2 emissions significantly; however, this
policy benefits only richer households that own a car.
Low-income households do better under the fuel tax policy
than under the efficiency improvement and congestion toll
policies. The congestion toll and fuel tax require the
travel cost per mile to more than triple. The responsiveness
of aggregate fuel and CO2 are, approximately, a 1 percent
drop for each 10 percent rise in the money cost of a car trip.