Conclusions

Climate change is one of the defining issues of our time. The transport sector is one of the biggest and fastest-growing sectors, so naturally it will have to face very strong policy instruments to reduce emissions. It is worth reflecting on whether this sector is easier or more difficult to deal with than other sectors and how gasoline and diesel compare to other fuels such as coal that also contribute to climate change. Technically it is much simpler to deal with fuel change in large boilers than in car engines. For this reason carbon abatement is typically a lot cheaper in industrial applications. However, policy instruments that regulate industrial energy use (including electricity) are politically very sensitive, since effects on competitiveness and loss of jobs are feared. Among the fossil fuels used by households, fuels such as kerosene are used for heating and cooking by very low income households in poor countries and are thus again very sensitive. Due to these concerns, it may still be easier to deal with the transport sector that is largely local ¹ in character and where incidence is largely on consumers not producers. However, the distributional consequences of fuel taxation will be crucial to its political feasibility.