A CO2 Emission Trading Scheme for German Road Transport

To attempt to counter the possible impacts of global warming, the European Union promised to reduce its carbon dioxide (CO2) emissions by 8 % until 2010 compared to 1990. So far, the transport sector, which contributes to around 28 % of European CO2 emissions, has been exempted from the European Emission Trading Scheme (ETS), although it is the only sector which increases its CO2 emissions.
The author develops a partial meso-economic simulation model with multi agent attributes to assess the impacts of an upstream CO2 emission trading scheme in German road transport. The effects on certificate prices and fuel demand are calculated with respect to the individual reaction functions of households and freight forwarders. It becomes apparent that from the current perspective the willingness-to-pay of households for prestigious (but fuel-inefficient) cars is outbalanced by technical mitigation costs in other sectors. Thus, in the open trading scheme (extended ETS) no major changes in transport demand are assumed. The main effect will be steady CO2 emissions in road transport but high payments to other sectors for mitigation. Macroeconomic impacts complete the analysis.