Three Essays in Environmental and Transportation Economics

The transportation sector contributes around 30% of US greenhouse gas emissions, and reducing these emissions is an important part of any large-scale climate policy. This dissertation examines three questions about policies and programs designed to reduce emissions from heavy-duty trucks and cars, using a range of economic data and methodologies.The first chapter considers the recent federal fuel efficiency standards for heavy-duty trucks, which mandated that the average fuel efficiency of trucks sold by each manufacturer reach certain levels. To estimate the welfare implications of the policy, I develop a model of supply and demand in the sector using detailed data on vehicle sales and new data sources to observe model-level fuel efficiency. Buyers choose vehicles to maximize their utility based on vehicle characteristics and the industry in which they operate. Manufacturers choose prices and the level of fuel efficiency technology in order to maximize profits while complying with the standards. I find that buyers undervalue fuel efficiency in heavy-duty trucks. Under conservative assumptions about the cost of improving fuel efficiency needed to rationalize the historic non-adoption of certain technologies, the environmental benefits are smaller than the costs to manufacturers and buyers. However, when the uninternalized fuel savings are taken into account, the benefits are 1.1 to 6.8 times larger than the costs of the policy. These findings suggest that the fuel efficiency standards can reduce emissions from trucks while improving economic efficiency in the aggregate, though the costs and benefits are not evenly shared among buyers. The second and third chapters examine the potential of electric vehicles to replace gasoline vehicles and reduce emissions. In the second chapter, which is coauthored with Kenneth Gillingham and Marten Ovaere, we analyze the interactions between electric vehicle adoption and different levels of a carbon tax. Using historical data on the relative price of coal and natural gas as a proxy for a price on carbon, we show that in several regions of the US, marginal generation becomes more emitting as the implicit carbon price, based on the coal- to-gas price ratio, increases and coal plants are pushed to the margin. We complement this empirical analysis with a detailed simulation of these dynamics over a longer time horizon and with non-marginal changes in electricity demand associated with electric vehicle adoption. Here, too, we find that for moderate carbon prices similar to those in place in parts of the country today, when electric vehicles are adopted in combination with a moderate carbon price, they may increase environmental damages. This adverse interaction is the result of increased electricity demand from electric vehicles keeping online coal plants that may otherwise have been forced to retire by the carbon tax. Under higher carbon prices, no such interaction occurs. These results may be useful for policymakers who are considering implementing a portfolio of related environmental policies in tandem. Where the second chapter took as a given that a combination of policies, technology innovation, and changes in preferences could increase electric vehicle adoption, the third chapter evaluates how potential electric vehicle buyers respond to price incentives. With Kenneth Gillingham, I analyze the effects of a short-term incentive program available to Connecticut residents who purchased new Nissan Leafs in 2017. We estimate that the $10,000 incentive increased demand for new Nissan Leafs by at least 240% in the short term, with no observable reductions in other electric vehicle sales and only a small amount of cannibalization of future Leaf sales. However, using data on the other vehicles that buyers were considering, which were disproportionately other fuel efficient cars, we find that the environmental benefits were limited relative to the magnitude of Nissan’s incentive or the state and federal subsidies also available to buyers. While these large subsidies may be rationalized by other market failures, this may have implications for how policymakers try to target electric vehicle incentives. A range of policies may be adopted in coming years to increase the sales of fuel efficient or alternative fuel vehicles. This dissertation aims to provide useful insights about the effectiveness and tradeoffs of different policies