Energy and environment challenges in the transport sector

This paper discusses the economics of three environmental and energy issues in transport: local air pollution, energy supply and climate change. The focus is on road transport as the dominant transport mode. The application of the main environmental instruments is briefly discussed for local air pollution. For energy supply and climate change we analyze a wider set of instruments including import taxes, steering modal choice, new vehicle technologies and land use policies.

► Paper collects key insights on how to analyze air pollution, energy dependence, and climate change. ► Offers a stylized model to compare alternative policy instruments for vehicles. ► Pathways for transition to decarbonized mobility systems are difficult and costly. ► If China and India do not follow EU type gas tax policies, transport becomes largest CO2 emitter.