Chapter 1. This chapter aims to find the effects of financial point of sales incentives on the sales of electric vehicles across the Canadian provinces from September 2012 to December 2016. The findings of my study indicate that purchase incentives cause the sales of new electric vehicles to increase by 8 percent on average due to a $1000 increase in incentives. I find that 47% of electric vehicle sales across the rebating provinces (Ontario, Quebec, and British Columbia) are attributed to the purchase incentives. Results of my counter-factual simulations imply that the cost of eliminating one tonne of carbon emissions across the provinces that offer incentives over the years of my study is, on average, $216/tonne CO2. Chapter 2. In light of the rapid increase in Canadian gasoline prices from 2000 to 2010, this chapter focuses on the relationship between gasoline price and demand for vehicle fuel efficiency across the Canadian forward sortation areas (FSA) over this period. I find that consumers respond to variations in gasoline price when deciding the fuel efficiency of their new vehicle; increases in gasoline price result in shifts in demand for more fuel-efficient vehicles and therefore improve the average fuel efficiency of the new vehicle fleet. I find that the elasticity of fuel economy with respect to gasoline price for new vehicles sold across the Canadian forward sortation areas (FSA) from 2000 to 2010 is -0.06 to -0.16. Results of further analyses imply that consumer are more responsive to rising and constant gasoline prices than falling prices and that urban residents are slightly more responsive to variations in gasoline price compared to residents of suburb regions. Chapter 3. This chapter investigates the effect of the carbon tax policy implemented by the Canadian Province of British Columbia on households’ new vehicle purchase decisions. I dis-aggregate the effects of gasoline price into two effects: the carbon tax and carbon tax-exclusive gasoline price. These effects are both measured along the extensive margin of replacing a fuel inefficient vehicle with a fuel-efficient vehicle. The results indicate that there is a significant negative relationship between both effects and fuel efficiency substitutions. However, vehicle fuel economy is more sensitive to changes in the carbon tax than to equivalent changes in the carbon tax-exclusive gasoline price. I find that the elasticity of fleet fuel economy with respect to the carbon tax ranges from -0.22 to -0.26 whereas this elasticity changes between -0.1 and -0.15 with respect to gasoline price (net of the carbon tax). I obtain consistent results when estimating the effect of both factors on fleet fuel economy conditional on fleet composition, indicating that almost all vehicle segments respond more strongly to changes in the carbon tax component of gasoline price than other components. Results also imply that, among all segments, the fuel consumption of compact sport utility vehicles (SUVs), minivans, and luxury high-end cars respond the most to the carbon tax.

<div>The purpose of this dissertation is to study the effectiveness of public policies in generating fuel savings and emissions reductions. I focus on applying various empirical methods to analyze consumer responses to policy changes on both extensive and intensive margins. This dissertation consists of two chapters.</div><div><br></div><div>In the first chapter, I compare the effectiveness of fuel taxes and product taxes on reducing gasoline consumption of new car buyers. I employ a unified data source for vehicle choice and subsequent vehicle use to estimate a random effects logit demand model that explicitly accounts for vehicle use heterogeneity. My demand estimation suggests that new car buyers fully value the fuel-saving benefits from improved vehicle fuel efficiency when they initially purchase their cars. My policy simulations indicate that high-mileage drivers are more responsive to a change in fuel taxes than to a change in product taxes, even as low-mileage drivers are more responsive to product taxes. By capturing such heterogeneous consumer response to policies, I show that a counterfactual increase of the fuel tax is more effective than a revenue-equivalent product tax in reducing the total gasoline consumption of new car buyers. Further, when accounting for its effects on consumer response on both extensive and intensive margins, a change in fuel taxes has a clear advantage over a change in product taxes in reducing the consumption of gasoline even when the magnitude of tax increase is small. More importantly, a model not accounting for vehicle use heterogeneity understates the fuel saving effects of both policies and misleads us about the relative effectiveness when comparing different policies. </div><div><br></div><div>The second chapter explores how changes in the marginal cost of driving affect consumers decisions about passenger vehicle utilization, as measured by average daily miles traveled per vehicle. This intensive margin of consumer response has important implications for the effectiveness of usage-based policies, such as the fuel tax and the mileage tax, that designed to address externalities of driving. I estimate the elasticity of driving with respect to fuel cost per mile using a large panel data that covers 351 towns and cities in Massachusetts over 24 quarters. While most researchers in this literature apply fixed effects estimators to examine the elasticity of driving, I use a factor model econometric setup to account for unobserved common factors and regional heterogeneity. Residual diagnostics confirm that the factor model setup does a better job of removing the cross-section dependence than fixed effects estimators do. Given low consumer responsiveness to changes in the marginal cost of driving engendered by current usage-based policies, rights-based approaches like congestion charges might be better alternatives to influence vehicle utilization and vehicle ownership.</div>