Comparing the Scandinavian automobile taxation systems and their CO₂ mitigation effects

Abstract

Despite their similarities, Scandinavian countries have adopted starkly different automobile tax regimes. The Danish system entails very high and convex tax rates with moderate CO 2 differentiation. In Norway, tax rates are high and convex with strong CO 2 differentiation and total exemptions for zero emission vehicles, even from value added tax. Sweden practices feebates -CO 2 dependent subsidization along with moderate taxation. Relying on a disaggregate discrete choice model of automobile purchase, we simulate the demand for passenger cars as of 2016 in Norway under a set of conditions resembling, respectively, the Danish, Norwegian or Swedish fiscal incentives before and after recent reforms. In all cases, implications are derived in terms of energy technology market shares, average type approval CO 2 emission rates, and aggregate fiscal revenue. The automobile taxation system is seen to have remarkable impacts on all three accounts. In essence, among the three jurisdictions examined, the Norwegian fiscal regime has by far the strongest CO 2 abatement effect. The Danish system is less effective in terms of CO 2 abatement, but provides twice as much government revenue. The Swedish feebate strategy is by far the least effective in terms of both CO 2 mitigation and revenue collection. HIGHLIGHTSAutomobile taxation is a powerful greenhouse gas abatement instrument. Tax exemptions for battery electric cars accelerate their market uptake. The disparate experiences of the three Scandinavian countries are quite instructive.

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