Determining the welfare effects of introducing a cap-and-share scheme on rural commuters

Commuters in rural Ireland, like in many other countries are primarily constrained to using private vehicles as their primary form of transport. This reliance on motorcars is much greater than in urban areas which are well served by public transport. With this in mind, carbon reduction schemes such as carbon taxation and carbon trading which penalise the use of these less sustainable modes of transport, have the potential to create inequitable outcomes for commuters in rural areas. This paper evaluates the welfare effects of introducing a cap-andshare scheme on the end users of transport in rural Ireland. It focuses on individuals who undertake daily commute trips as surveyed in the Census of Population, 2006. Two distinct regions are chosen as study areas for the analysis: the urbanised Dublin Metropolitan Region (DMR) and the rural Western & Border Region (WBR). These two regions are chosen as a means of comparing the welfare loss of rural commuters against urban commuters. A welfare analysis utilising a consumer surplus model is used to determine the effects of the scheme on each region. The findings show a significantly higher welfare loss to commuters residing in sparsely populated rural areas in comparison to urban commuters. This finding is also true of commuters living in relatively deprived areas which frequently are also rural regions where the more affluent areas bear less of the welfare loss than deprived areas. These results demonstrate the need for policies which compensate the most deprived areas in tandem with introducing a cap-and-share scheme in Ireland to avoid inequity outcomes.