Abstract:

This study comprehensively analyzed the impact of transportation policy tools on the Korean road transport system, economy, and environment. To facilitate this analysis, we devised a national integrated computable general equilibrium model, encompassing vehicle dynamics and choice mechanisms. The authors assessed six policy scenarios, along with three policy mix scenarios. The findings of the study demonstrate the effectiveness of battery electric vehicle (EV) transition strategies, such as diesel vehicle phase-outs, subsidies, and a sales ban on internal combustion engine vehicles (ICEV), in reducing CO2 emissions and enhancing gross domestic product. The existing transportation policy mix falls short of achieving carbon neutrality in the transportation sector, which requires additional measures like EV subsidies, a vehicle-kilometers-traveled tax, and a prohibition on ICEV sales. Furthermore, the provision of subsidies for EVs, when paired with an economy-wide cap-and-trade policy, holds the potential to improve overall economic performance while mitigating the rebound effect that is detrimental to the environment.