Gasoline Tax? A System Dynamics Study of Private Passenger Vehicles in China
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Scarcity of oil and increasing demand make the crude price continue to climb, and such pressure urges our effort to reduce the reliance on oil products. As a major consumer of oil synthetic fuels, the transportation sector needs to take a big step in energy conservation. To inform policy makers of costs and benefits in the future of decisions made now, this paper develops a system dynamic model to explore the role of gasoline taxation in the process of fuel economy technology development and adoption. The model focuses mostly on the interplay of gasoline price change, car consumer choices and automakers technology investment decisions. It is built and simulated in the context of China and its growing private passenger car market. Gasoline tax, tax refund, technology development subsidy are tested and compared. When the gasoline price increases, the sooner we impose the gasoline tax, the better. Even though we face a cost increase right after the tax imposition, we can enjoy a much lower cost later and cover the cost increase before. Taking the tax as subsidy for technology development of fuel economy, a much better benefit can be enjoyed.