UC Irvine

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This thesis uses the tools of applied econometrics to study the impact of economic incentives on household welfare and decision-making and the environmental outcome of urban transportation policies in the U.S. and in developing countries.

Transportation is an essential component of day-to-day life. An extensive transportation system offers mobility, expanding individuals' access to employment opportunities, agglomeration benefits to firms and employees, reduced trade costs, and an overall increase in productivity. The positive effects of an efficient transportation network in an economy are often accompanied by rising motorization rates. This, in turn, can lead to air pollution, road congestion, and increasing dependence on fossil fuels. In the past few decades, climate change concerns have made policymakers and governments agencies in both developed and developing countries incentivize improvement in fuel economy of vehicles as well as promote alternative fuel vehicles.

Alternative fuel vehicles currently arriving in the market offer better driving performance compared to their predecessors, and their market penetration is higher than before. However, most people still do not consider these alternative fuel vehicles as a substitute of traditional gasoline cars. Incentives offered to consumers to promote adoption have achieved varied results. The first chapter of the dissertation studies the stated vehicle transaction decisions of 3,154 survey respondents located in the state of California. While the effectiveness of policy incentives like tax credits and rebates is found to be more universal, the effect of High Occupancy Vehicle (HOV) lane permit or free parking benefit on adoption decision depends on the likelihood of the household being able to use the benefits. In addition, familiarity with an alternative fuel technology is found to be positively correlated with the preference for electric battery or hydrogen fuel cell vehicles. Prior ownership of a hybrid vehicle made the household more likely to purchase an alternative fuel vehicle in the future. This persistence in choice behavior can be attributed to heterogeneity among vehicle purchasers or considered as a sign of positive experience. Experience can reduce skepticism about alternative fuel vehicles and induce future adoption. Accounting for the number of years of ownership of alternative fuel vehicles, the results show that more experience has a positive effect on the probability of repurchase of the same or a newer technology vehicle. This result contributes towards a long standing debate of whether the incentives work only as a marketing mechanism or does it have any long term benefits. The positive correlation in preference pattern and the willingness to pay measures indicate that even if the price-based incentives work as a marketing mechanism they play an important role in initiating potential state dependence in purchase behavior to improve adoption in the long run.

In recent years, emerging economies like India and China have been experiencing the externalities related to increased motorization. Urbanization accompanied with increasing per capita income has led to a rise in private automobile demand. Historically, the infrastructure of major metropolitans in these emerging economies was not designed to support a sudden rise in the use of automobiles. As a result, a majority of these metropolitans suffer from congestion and pollution from greenhouse gas (GHG) emissions. The local government and policymakers in these economies are considering a variety of policies like to scrap old polluting vehicles, impose fuel standards, cordon tolls, and driving restrictions to address these issues. Driving restrictions has been implemented in several metropolitan cities in emerging economies like Beijing, China, Santiago, Chile, Mexico City, Mexico, S\~{a}o Paulo, Brazil, Bogot {a}, Colombia, and recently New Delhi, India. According to this policy, cars with license plate numbers ending with certain digits are allowed to be driven on separate days of the week. A number of studies have shown that though the license plate based policy is effective in the short run in reducing local pollutants as well as GHG emissions, it is not effective in the medium or long run. In spite of these results, it is considered more equitable compared to price-based policies like congestion tax or a cordon toll that may impose a greater financial burden on the low-income commuters. At present, there is a limited number of studies that consider the distributional effect of the policy. The second chapter on license-plate-based driving restriction policy considers the distributional effect of the policy in comparison to a cordon toll and a vehicle mile tax by analyzing the mode choice of commuters in Santiago, Chile. Analysis of different policy scenarios suggests that though the restriction has a negative distributional effect on all commuters, in the absence of a revenue recycle mechanism the effect is less adverse in comparison to a vehicle mile tax or a cordon toll for the same level of reduction in total car trips.

Transportation and the power sector are the leading sources of GHG emissions in the U.S. Policies and programs trying to reduce GHG emissions from the power sector like the federal Clean Power Plan, rebates and tax credits for the adoption of rooftop photovoltaic cells, and the renewable portfolio standard incentivizes investment in renewable energy resources. The programs have increased the share of renewable resources in the grid but, utilities are finding it hard to integrate these intermittent sources of energy into the regular dispatch module. In the transportation sector, the policy focus has mostly been on encouraging adoption of electric vehicles (EV). The latter has zero tailpipe emissions but has to be connected to the grid to operate the vehicle. Electricity pricing will play a major role in dealing with this quandary. The third chapter on electricity pricing and EV charging behavior considers the environmental impact of shifting from tiered or block pricing structure to a time-of-use rate structure that matches consumption with the time-varying cost of electricity production. The results provide evidence supporting the decision to change the pricing structure as marginal emissions of carbon dioxide is lower under the time-of-use rate structure compared to the tiered pricing plan. Moreover, the analysis of emissions in each time-of-use period brings forth the importance of defining the periods such that utilities and environmentalists can maximize the benefits of EV adoption and the increasing share of renewable energy resources in the power sector.