Accelerating the transformation to a low carbon passenger transport system: The role of car purchase taxes, feebates, road taxes and scrappage incentives in the UK

Abstract

The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car use.The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO2 grading and tightening of CO2 limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are 2 of 32 likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward 'low carbon' and penalize 'high carbon'. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.

The replication and reduction of automobility: Findings from Aotearoa New Zealand

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Fiscal Policy and $$\hbox {CO}_{2}$$ CO 2 Emissions of New Passenger Cars in the EU

“…For example, compared to annual taxes, vehicle acquisition taxes are more effective in directing consumers' buying decisions (Brand et al 2013;Gallagher and Muehlegger 2011;Klier and Linn 2015;van Meerkerk et al 2014). Consumer myopia is considered the main reason for this discrepancy.…”

The effect of registration taxes on new car sales and emissions: Evidence from Switzerland

“…In several countries, the incentives take the form of one-off excise taxes on the purchase of new vehicles (Brand et al, 2013), with the tax rate positive and high for high emitters and low (or even negative) for low emitters, as in France (Klier and Linn, 2015; D'Haltfoueiulle et al, 2014), Finland (Stitzing, 2015), Sweden (Huse and Lucinda, 2013;Klier and Linn, 2015), the Netherlands (Kok, 2015), Denmark (Mabit, 2014) and/or an annual registration fee (also termed circulation tax 2 ) linked to the CO 2 emissions rates of the vehicle, as in the UK, Germany, and Sweden (Cerruti et al, 2015;Klier and Linn, 2015;Kok, 2015). In principle, all of these fees can be structured as feebates, where the revenues from imposing taxes on high emitters are used to finance refunds to low emitters (Anderson et al, 2011).…”