TEL  Vol.4 No.4 , April 2014
The Optimal Gasoline Tax for China

Gasoline-powered vehicles produce many negative externalities including congestion, air pollution, global climate change, and accidents. A gasoline tax is perhaps the best policy to jointly address these externalities. This paper calculates the optimal gasoline tax for China. Using a model developed by Parry and Small [1] [2], we calculate the optimal adjusted Pigovian tax in China to be $1.58/gallon which is 2.65 times more than the current level. Of the externalities incorporated in this Pigovian tax, the congestion costs are taxed the most heavily, at $0.82/gallon, followed by local air pollution, accident externalities, and finally global climate change.

Gasoline Tax, China

Cite this paper
Lin, C. and Zeng, J. (2014) The Optimal Gasoline Tax for China. Theoretical Economics Letters, 4, 270-278. doi: 10.4236/tel.2014.44037.
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