Spatial Effects of Diesel Taxes: Trade and Pollution
This paper analyzes the environmental externalities of interstate trade by heavy-duty trucks in the US and quantifies the welfare consequences of change in the state and federal diesel taxes. I use the data on trade volumes from the Freight Analysis Framework and match it with web-scraped data on diesel prices. To perform the counterfactual analysis, I combine a structural general equilibrium trade model with reduced-form estimates of key parameters. I find that an increase in New Mexico state diesel tax leads to an increase in CO2 emissions due to the shipment of goods from more remote areas with cheaper fuel prices. The social welfare loss due to the increased state diesel tax in New Mexico can surpass 1 billion $US.