Estimating the Environmental Benefits of Gasoline Taxes and the Market Benefits of Hybrid Vehicles

asoline usage has been a popular topic of discussion recently in political and economic fields. From the standpoint of energy regulation, the United States' heavy dependence on gasoline as an energy source is a recognized issue. Similarly, in environmental economics, carbon emissions and air pollution from gasoline-burning vehicles are a major concern. To better inform discussion on these issues, I estimate the social benefits from reduced carbon emissions resulting from the imposition of gasoline taxes, and the consumer market benefits from the creation of hybrid vehicles. By understanding the scope of the impact that changes in energy-saving policies and technologies have, social planners can anticipate changes in the automotive and gasoline markets more precisely and better maximize welfare.;First, I develop a two-part, vehicle choice and vehicle usage model to estimate the elasticities of demand for U.S. gasoline across time. The estimates are used to predict the social benefit a gasoline tax would provide in terms of reduced carbon emissions. I estimate a wide range of gasoline price elasticities under the same model using new vehicle data gathered from the Panel Survey of Income Dynamics, focusing on consumer response while holding manufacturer choices fixed. For the period from 1999-2009, conditional on households that use vehicles, the vehicle usage model predicts a short-run elasticity of -0.23 and a long-run elasticity of -0.38. For all households, simulations run on the full model find a short-run elasticity of -0.21 and medium-run elasticities beginning at -0.28 two years after the price shock and increasing to -0.34 ten years after the shock. Using estimates of social benefits from reduced gas consumption provided by the National Research Council, I find that a 20% gasoline tax on constant 1999 gas prices and a constant 1999 vehicle choice set over time (i.e., no technological advancement in vehicle attributes) would have generated benefits from reduced carbon emissions (expressed in 2001 present discounted values) of ;Second, my co-author Ken Gillingham and I estimate a demand and supply model of the new car market to measure the benefits generated by the introduction of the hybrid vehicle to the U.S. automobile market. The data under this model uses the complete set of new vehicle registrations in the state of California from 2001-2008, which allows us to adequately capture the effects of a small segment of the market. Using a counterfactual analysis of the market without hybrid vehicles, we examine the changes in consumer utility and calculate compensating variation to estimate the average benefit that the availability of hybrids brings to consumers, conditional on observable characteristics based on their residence. Compensating variation is initially estimated at...