The transportation sector is responsible for 20% of global greenhouse gas emissions. Policy makers have therefore implemented various transport-related climate policies that are often limited to specific markets or regions. While effects of such policies on supply and demand within targeted market(s) are already well understood, their indirect effects—commonly referred to as spillover effects—are less frequently studied. Spillover effects arise when policies alter relative prices, supply, or demand across related (up- or downstream) markets or neighbouring regions that are not directly regulated. Examples of policies creating spillovers could be measures promoting electric vehicle (EV) adoption, such as subsidies and emissions standards. These measures directly affect EV costs and supply but can also alter travel behaviour, leading to longer commutes or relocations. Transport policies may also create spatial pillovers. Car-free zones, for instance, increase amenities but shift traffic to nearby areas. Ignoring spillovers across markets and space in policy evaluations can result in an under- or overestimation their impact on emissions and welfare, leading to suboptimal designs and unintended consequences.

This project aims to answer the following research questions: How do spillovers across regions or markets of transport-related climate policies impact consumer welfare, greenhouse gas emissions, and firm performance? How should policies to decarbonise urban mobility and specifically cars be designed to take account of these spillovers? We use structural simulation-based equilibrium models that are extraordinarily well suited to study the spillover effects of transport-related climate policies across markets and regions. The method enables us to derive policy-relevant insights that allow decision makers to design climate policies in the transport sector more efficiently by taking into account spillover effects.