Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229580 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8762
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Transport has significant externalities including carbon emissions and air pollution. Public health research has identified additional social gains from active travel, due to health benefits of physical exercise. Per mile, these benefits greatly exceed the external costs from car use. We introduce active travel into an optimal fuel taxation model and analytically characterise the optimal second-best fuel tax. We find that accounting for active travel benefits increases the optimal fuel tax by 49% in the US and 36% in the UK. Fuel taxes should be implemented jointly with other policies aimed at increasing the uptake of active travel.
Subjects: 
transport externalities
congestion
active travel
fuel
health behaviour
optimal taxation
JEL: 
H23
I12
Q53
Q54
Q58
R41
R48
Z28
Document Type: 
Working Paper
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