Carbon allowance allocation in the transportation industry

Abstract

This study proposes models for projecting reductions in CO2 emissions of 10%, 20%, 30%, and 40% compared to business as usual (BAU), using a carbon allowance allocation policy and both unimodal and intermodal modes of transportation. The results show that for 10% to 80% decreases in free carbon allowance, the intermodal ratio increased from 1.01% to 53.44%, which led to decreases in carbon emissions and demand ranging from 10.41% to 48.19% and 8.45% to 7.57%, respectively. When free carbon allowances are decreased, the demand for intermodal systems increases accordingly. These results suggest that a carbon allowance allocation policy could mitigate transportation carbon emissions with a relatively small negative impact on economic activity.