Tax and regulatory policies:
getting there but in the slow lane
Stef Proost (KULeuven+KTH Stockholm)
Joint work with Bruno De Borger (UA)
Policy bullets – focus on road transport
– External costs are used in policy but
• too much attention to climate and energy
• Not enough to congestion and local air pollution
– For cars
• Combination of strict fuel efficiency standards and high gasoline
taxes are a costly mix to reduce emissions
• Encouraging diesel, electric and ethanol cars is inefficient climate
and energy policy – a fuel efficient gasoline car can woldwide be
more efficient
• Replace current mix by more localised congestion and air pollution
tax instruments (road pricing)
– For Trucks
• Countries are switching away from diesel taxes to distance
charging and this will be difficult to stop
• The main motivation is tax revenues and this will give rise to too
high taxes on trucks
• Time and place differentiated distance charges on trucks and cars
can be efficiency enhancing but the potential can only be tapped if
one does it simultaneously for cars and trucks
External costs of road transport
Climate
FUEL
DISTANCE
Consumption related
VEHICLE
related
(Fuel tax , fuel
efficiency
standard)
(standards,
Purchase taxes)
(Distance charge,
road
Pricing)
YES
(2 ton CO2/year)
Environmental poorly
YES
WHERE+WHEN
Accidents
no
YES
WHERE+WHEN
Congestion
poorly
YES
WHERE+WHEN
poorly
Car policies “of the past”
-high gasoline tax as 2nd best taxCurrent 2nd best Gasoline tax per liter
EUR/liter
1
Fuel related external costs
(Climate damage)
0.10
mileage related externalities (congestion, ..)
X share of fuel reduction due to reduced
mileage
0.90
- Current gas tax= 200 Euro/ton climate tax
- Stricter fuel efficiency standard limits the incentive to reduce mileage related
externalities
- Diesel tax/liter should be higher than gas tax/ liter as diesel car requires less liter per
km and air pollution is higher
Car policies “of the past”
- strict fuel eff standards and alternative fuels• Fuel efficiency standards
• Costly (on top of a high tax)
• In some countries (NL, DK,..) purchase taxes were reformed into
progressive CO2 tax (cost of up to 2000 Euro/ton of CO2)
• Positive: technological externalities to the rest of the world
• BUT: a non-cooperative climate world is not ready to pay for fancy
(super-efficiency technogies)
– Extra cost of hybrid Electric car: +1000 Euro/car/year saves 0.5 ton
CO2/year
– Fuel efficient gas car: +500 to 1000 Euro/car
• Alternative fuels
• High Fuel import bill is not an argument
• Security of supply argument?
Car policies “of the future”
• Less relying on gas taxes and more on
localised policies
• Better air pollution standards for diesel
• More on Parking prices and Congestion pricing
– Acceptance is still major problem
• Public transport if Cost Benefit Analysis and
correctly priced (congestion pricing)
Truck pricing
• Diesel taxes were main instrument in the past
– Tax competition among countries kept taxes low
• Some countries started distance charging and this
avoids largely tax competition
– It will spread over Europe as it generates more
revenues
– Drive down diesel fuel taxes
– Charges may be too high (tax exporting)
– Real benefit of distance charging only comes when
they are time and place based and when there is also
congestion pricing for cars
Policy bullets – focus on road transport
– External costs are used in policy but
• too much attention to climate and energy
• Not enough to congestion and local air pollution
– For cars
• Combination of strict fuel efficiency standards and high gasoline
taxes are a costly mix to reduce emissions
• Encouraging diesel, electric and ethanol cars is inefficient climate
and energy policy – a fuel efficient gasoline car can woldwide be
more efficient
• Replace current mix by more localised congestion and air pollution
tax instruments (road pricing)
– For Trucks
• Countries are switching away from diesel taxes to distance
charging and this will be difficult to stop
• The main motivation is tax revenues and this will give rise to too
high taxes on trucks
• Time and place differentiated distance charges on trucks and cars
can be efficiency enhancing but the potential can only be tapped if
one does it simultaneously for cars and trucks