Towards High-Resolution First-Best Air Pollution Tolls

In this paper, an approach is presented to calculate high-resolution first-best air pollution tolls with respect to emission cost factors provided by Maibach et al. (2008). Dynamic traffic flows of a multi-agent transport simulation are linked to detailed air pollution emission factors. The monetary equivalent of emissions is internalized in a policy which is then used as a benchmark for evaluating the effects of a regulatory measure—a speed limitation to 30 km / h in the inner city of Munich. The calculated toll, which is equal to simulated marginal costs in terms of individual vehicle attributes and time-dependent traffic states, results in average air pollution costs that are very close to values in the literature. It is found that the regulatory measure is considerably less successful in terms of total emission reduction. It reduces emissions of urban travelers too strongly while even increasing the emissions of commuters and freight, both leading to a increase in deadweight loss. That is, the regulatory measure leads to higher market inefficiencies than a “do-nothing” strategy: too high generalized prices for urban travelers, too low generalized prices for commuters and freight. Finally, long-term changes in the vehicle fleet fuel efficiency are assumed as a reaction to the Internalization policy. The results indicate, however, that the long-term effect of emission reduction is dominated by the short-term reactions and by the assumed improvement in fleet fuel efficiency; the influence of the resulting route and mode choice decisions turns out to be relatively small.