Measuring effectiveness of carbon tax on Indian road passenger transport: A system dynamics approach

Abstract

The objective of this study is to examine whether carbon tax as a mitigation instrument could be effective in reducing CO2 emissions from road passenger transport in India. A simulation exercise with system dynamics modelling is used to explore various scenarios pertaining to the carbon tax on fuel. To validate the model, available data from 2000 to 2011 on major variables such as CO2 emissions, passenger kilometre travelled and GDP growth rate has been used in the paper as a reference case. Findings from scenario analysis using different tax rates indicate a potential reduction in CO2 emissions in the range of 26 to 40% as compared to a baseline scenario in 2050. The analysis shall assist policymakers in designing an appropriate rate of the carbon tax and optimise its effect through revenue recycling.