Cherbonnier, FrédéricORCID: https://orcid.org/0000-0002-9728-0824, Ivaldi, MarcORCID: https://orcid.org/0000-0002-4244-7690, Muller-Vibes, Catherine and Van der Straeten, Karine (2025) Welfare implications of a carbon tax in a long-distance passenger market. TSE Working Paper, n. 25-1656, Toulouse

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Abstract

This study estimates the impact of a carbon tax on welfare, considering modal shifts to less carbon-intensive transport, as well as its effects on environmental and fiscal externalities. We calibrate a modal competition model using logit demand functions for a specific long-distance connection in France and simulate the introduction of a Pigouvian tax. Our key findings are: First, a €190/tCO2 carbon tax is nearly welfare-neutral but significantly detrimental to consumer surplus; Second, rail price regulation has the side effect of reducing greenhouse gas emissions by subsidizing the cleanest transport mode; Third, the widespread adoption of electric vehicles enhances overall welfare without significantly harming consumer surplus.