Econometric Estimation of the Climate Change Policy Effect in the U.S. Transportation Sector

Abstract

Over the past centuries, industrialization in developed and developing countries has had a negative impact on global warming, releasing CO₂ emissions into the Earth’s atmosphere. In recent years, the transportation sector, which emits one-third of total CO₂ emissions in the United States, has adapted by implementing a climate change action plan to reduce CO₂ emissions. Having an environmental policy might be an essential factor in mitigating the man-made global warming threats to protect public health and the coexistent needs of current and future generations; however, to my best knowledge, no research has been conducted in such a context with appropriate statistical validation process to evaluate the effects of climate change policy on CO₂ emission reduction in recent years in the U.S. transportation. The empirical findings using an entity fixed-effects model with valid statistical tests show the positive effects of climate change policy on CO₂ emission reduction in a state. With all the 49 states joining the climate change action plans, the U.S. transportation sector is expected to reduce its CO₂ emissions by 20.2 MMT per year, and for the next 10 years, the cumulated CO₂ emission reduction is projected to reach 202.3 MMT, which is almost equivalent to the CO₂ emissions from the transportation sector produced in 2012 by California, the largest CO₂ emission state in the nation.