In his March 1993 Budget, the Chancellor announced a commitment to increase the real value of road fuel duty in subsequent Budgets as part of a strategy to return UK CO2 emissions to 1990 levels by the year 2000. This paper examines the effect of higher fuel prices on UK road transport CO2 emissions using an econometric model of road transport fuel consumption. The model explains changes in fuel consumption in terms of fuel prices and incomes. It is structured so that the level of fuel consumption in a given time period (t) always approaches a long run equilibrium value given by: D(sub t) = alpha+beta P(sub t)+gamma Y(sub t). (D(sub t) is the total road transport fuel consumption; P(sub t) is the consumption-weighted real price of fuel; and Y(sub t) is the total final expenditure.) Results obtained using the model indicate that if the minimum commitments announced in the Budget were adhered to up to the year 2000, about 1.5 m tonnes of carbon would be saved, which represents about one-seventh of the overall saving required to meet the Rio commitment. (Author/publisher).
Abstract