Evaluating policies to reduce greenhouse gas emissions from private transportation

This paper proposes a model system to forecast household greenhouse gas emissions (GHGEs) from private transportation. The proposed model combines an integrated discrete-continuous car ownership model with MOVES 2014. Four modeling components are calibrated and applied to the calculation of GHGEs: vehicle quantity, vehicle type and vintage, miles traveled, and rates of GHGEs. The model is applied to the Washington D.C. Metropolitan Area. Three tax schemes are evaluated: vehicle ownership tax, purchase tax and fuel tax. We calculate that the average GHGEs per vehicle is 5.15 tons of carbon dioxide-equivalent (CO₂E) gases. Our results show that: (a) a fuel tax is the most effective way to reduce vehicle GHGEs, especially for households with fewer vehicles; (b) a purchase tax reduces vehicle GHGEs mainly by decreasing vehicle quantity for households with more vehicles; and (c) an ownership tax reduces vehicle GHGEs by decreasing both vehicle quantity and miles traveled.     

A model system for the assessment of the effects of car and fuel green taxes on CO2 emission

This study aims at developing a model system to examine the changes in the car market configuration, the life cycle CO₂ emission from automobile transport and the tax revenues due to different taxation policies. The model system specifically determines the effect of varying the weights of the tax components in the stages of a) car purchasing, b) car owning, and c) car using to the changes in the car class and age mix and the car users' driving pattern and behavior towards car class choice and decommissioning. Five sub-models comprise the model system, formulated using car ownership related data in Japan from 1980 to 1994. Performance tests conducted against the sub-models generally yielded encouraging results. The sensitivity analysis identified car usage tax as the most significant parameters in reducing CO₂. An increase in, ownership tax, on the other hand, significantly results to a shift to smaller cars, while the propensity to decommission and repurchase can be reduced by increasing the purchase tax and can be decreased by increasing the ownership tax. The model system was utilized to determine the impact of the 1989 tax reform and to forecast future scenarios using different taxation schemes. The model system is being further developed for possible future application in other countries.     

Six years of CO2-based tax incentives for new passenger cars in The Netherlands: Impacts on purchasing behavior trends and CO2 effectiveness

There is growing evidence that consumers respond more effectively to upfront price signals, such as vehicle purchase taxes and feebate policies, and to tax incentives that are more salient than others, such as company car taxes graded by CO₂ emissions. This paper examines tax changes in The Netherlands, which are among the most stringent and most salient in Europe, and assesses the ex-post purchasing impacts and CO₂ effectiveness of six years of CO₂-based tax incentives for low-carbon cars in The Netherlands. Dutch tax incentives resulted in 13 g/km, or 11% lower average CO₂ emissions in 2013. The Netherlands has moved from the 12th position before the tax changes in 2007 to become Europe’s number one in terms of the lowest average new car CO₂ emissions and highest share of electric vehicles in 2013. Tax incentives for new cars sold between 2008 and 2013 have resulted in 4.6 million tons of potential lifetime CO₂ abatement at the cost of a drop in tax revenues of 30–50%. However, when corrected for the Dutch policy-induced increasing real-world fuel-economy shortfall and leakage of carbon reduction potential through vehicle export of low-carbon cars, only 3.5 million tons or 75% of the CO₂ reduction remains. CO₂-based tax incentives for company cars seem to have contributed the most to the observed turnaround in purchasing behavior towards lower CO₂-emitting passenger cars.     

The effectiveness and costs of speed reductions on emissions from international shipping

Greenhouse gas emissions from international shipping are an increasing concern. The paper evaluates whether vessel speed reduction can be a potentially cost-effective CO₂ mitigation option for ships calling on US ports. By applying a profit-maximizing equation to estimate route-specific, economically-efficient speeds, we explore policy impacts of a fuel tax and a speed reduction mandate on CO₂ emissions. The profit-maximizing function incorporates opportunity costs associated with speed reduction that go unobserved in more traditional marginal abatement cost analyses. We find that a fuel tax of about $150/ton fuel will lead to average speed-related CO₂ reductions of about 20–30%. Moreover, a speed reduction mandate targeted to achieve 20% CO₂ reduction in the container fleet costs between $30 and $200 per ton CO₂ abated, depending on how the fleet responds to a speed reduction mandate.     

A welfare cost assessment of various policy measures to reduce pollutant emissions from passenger road vehicles

Policy options to reduce passenger transport emissions in Europe are simulated with the EUCARS model. The EUCARS welfare analysis includes changes in consumer surplus, congestion and tax revenues. Simulations also address consumer myopia, i.e., the underestimation of fuel costs by car buyers. The best policy mix to reduce CO₂ consists of fuel taxes that are combined with differentiated purchase taxes to correct for the assumed myopia. This combination could reduce CO₂ emissions of over 25% without reducing contemporaneous well-being. For the reduction of conventional emissions, an equivalent best mix includes an emissions-based kilometre tax combined with a purchase feebate. This mix allows a 60% reduction in toxic emissions without any noticeable welfare reduction. The overall superiority of these two mixes compared to alternative choices is higher when the evaluation includes a broad group of externalities, a premium on public funds, and positive feedbacks across emissions categories. Local traffic management measures are important zero-cost complements for an overall emissions strategy.     

Forecasting petrol demand and assessing the impact of selective strategies to reduce fuel consumption

Abstract

The use of fossil fuels in transportation is an important topic as a result of growing concerns over global warming. Automobile petrol demand has been of particular interest to researchers and policy-makers, given that the automobile is a major contributor to the enhanced greenhouse effect. This paper forecasts Australia's automobile petrol demand up to the year 2020 based on the best performing forecasting model selected out of eight models. In order to establish ways to reduce the demand for petrol, and the consequent by-product of reducing the amount of greenhouse gas emissions, we have estimated the impact on CO₂ for several potential policy instruments, using Transportation and Environment Strategy Impact Simulator (an integrated transport, land use and environmental strategy impact simulation programme). We find that a carbon tax of AU$0.50/kg can reduce automobile kilometres by 5.9%, resulting in reduced demand for petrol and a reduction in CO₂ of 1.5%.     

Impacts of an emission based private car taxation policy - First year ex-post analysis

This paper assesses the impacts of a targeted policy designed to influence car purchasing trends towards lower CO₂ emitting vehicles. Vehicle registration tax and annual motor tax rates in Ireland changed in July 2008 from being based on engine size to emissions performance of cars. This paper provides a one year ex-post analysis of the first year of the tax change, tracking the change in purchasing trends arising from the measure related to specific CO₂ emissions, engine size and fuel, and the implications for car prices, CO₂ emissions abatement, and revenue gathered. While engine efficiency improvements had been offset by purchasing trends towards larger and generally less efficient cars in the past, with the average MJ/km remaining constant from 2000 to 2007, this analysis shows that in the first year of the new taxation system the average specific emissions of new cars fell by 13% to 145 g/km. This was brought about, not by a reduction in engine size, but rather through a significant shift to diesel cars. Despite an unexpected reduction in car sales due to a recession in 2008, the policy measure has had a larger than anticipated impact on CO₂ emissions, calculated to be 5.9 ktCO₂ in the first year of the measure. The strong price signal did however result in a 33% reduction in tax revenue from VRT, in financial terms amounting to a drop of €166 million compared to a baseline situation.     

The tax treatment of company cars, commuting and optimal congestion taxes

In Europe, the preferential tax treatment of company cars implies that many employees receive a company car as part of their compensation package. In this paper, we consider a model in which wages and the decision whether or not to provide a company car are the result of direct negotiation between employer and employee. Using this framework, we theoretically and numerically study first- and second-best optimal tax policies on labour and transport markets, focusing on the role of the tax treatment of company cars. We obtain the following results. First, higher labour taxes and a more favourable tax treatment of company cars raise the fraction employees that receives a company car; congestion and congestion tolls reduce it. Second, in countries that provide large implicit subsidies to company cars, eliminating the preferential tax treatment of company cars may be an imperfect but quite effective substitute for currently unavailable congestion tolls. The numerical illustration, calibrated using Belgian data, suggests that it yields about half the welfare gain attainable through optimal congestion taxes. Third, the favourable tax treatment of company cars justifies large public transport subsidies; the numerical results are consistent with zero public transport fares. Finally, we find that earlier models that ignored the preferential tax treatment of company cars may have substantially underestimated optimal congestion tolls in Europe. The numerical illustration suggests that about one third of the optimal congestion toll we obtain can be attributed to the current tax treatment of company cars.     

Policy packages for modal shift and CO2 reduction in Lille,France

This paper proposes different policy scenarios to cut CO₂ emissions caused by the urban mobility of passengers. More precisely, we compare the effects of the ‘direct tool’ of carbon tax, to a combination of ‘indirect tools’ – not originally aimed at reducing CO₂ (i.e. congestion charging, parking charges and a reduction in public transport travel time) in terms of CO₂ impacts through a change in the modal split. In our model, modal choices depend on individual characteristics, trip features (including the effects of policy tools), and land use at origin and destination zones. Personal “CO₂ emissions budgets” resulting from the trips observed in the metropolitan area of Lille (France) in 2006 are calculated and compared to the situation related to the different policy scenarios. We find that an increase of 50% in parking charges combined with a cordon toll of €1.20 and a 10% travel time decrease in public transport services (made after recycling toll-revenues) is the winning scenario. The combined effects of all the policy scenarios are superior to their separate effects.     

How much should gasoline be taxed when electric vehicles conquer the market? An analysis of the mismatch between efficient and existing gasoline taxes under emerging electric mobility

The taxation of gasoline is characterized by large variability across countries and recent research has analyzed existing gasoline tax levels from an economic efficiency point of view focusing on conventional internal combustion engine vehicles. Most studies find that existing fuel tax rates do not coincide with economically efficient levels. As long as policymakers do not take action to reduce the resulting efficiency gap, there will be an ongoing welfare loss to the economy. However, the composition of passenger car fleets will probably be subject to fundamental changes in the (near) future due to the emergence of electric mobility. This raises the question of whether the mismatch between current and efficient fuel taxation will persist, shrink, or even exacerbate under emerging electric mobility. This paper aims at answering this question by determining the structure and level of optimal gasoline taxes in the presence of electric vehicles (EVs). First, the optimal (nationwide) gasoline tax is analytically derived employing a general equilibrium approach. It is shown that differences in traffic related marginal external costs among fuel powered cars and EVs affect the corrective Pigouvian component of the optimal gasoline tax while a differential tax treatment influences the fiscal rational of the tax. Second, the model is applied to Germany using differentiated data on e.g. external costs and behavioral responses. Under a wide range of scenarios, the present analyses indicate a strong relationship between optimal gasoline taxes and electric mobility, calling for a downward adjustment of efficient gasoline taxes. The effect is mainly driven by financial incentives for purchasing and using EVs. Since fuel is likely to be undertaxed in many countries, the emergence of electric mobility will therefore close the gap between gasoline taxes in place and economically efficient taxes. On the other side, it will increase the efficiency gap in those countries where gasoline is overtaxed. This also has important implications for policy concerned with environmental objectives. Pushing electric mobility seriously and at the same time taxing gasoline efficiently could actually prevent sufficient CO₂ emission savings. However, at least in the case of Germany, even a downward adjusted optimal gasoline tax under electric mobility is likely to be higher than the current (non-optimal) tax.     

The impact of a carbon tax on international tourism

A simulation model of international tourist flows is used to estimate the impact of a carbon tax on aviation fuel. The effect of the tax on travel behaviour is small: A global tax of $1000/t C would change travel behaviour and reduce carbon dioxide emissions from international aviation by 0.8%. A carbon tax on aviation fuel would particularly affect long-haul flights, because of high emissions, and short-haul flights, because of the emission during take-off and landing. Medium distance flights would be affected least. This implies that tourist destinations that rely heavily on short-haul flights or on intercontinental flights will see a decline in international tourism numbers, while other destinations may see international arrivals rise. If the tax is only applied to the European Union, tourists would stay closer to home and European tourism would grow at the expense of other destinations. Sensitivity analyses reveal that the qualitative insights are robust.     

Demand and welfare effects in recreational travel models: Accounting for substitution between number of trips and days to stay

In this paper we present a non-linear demand system for households’ joint choice of number of trips and days to spend at a destination. The approach, which facilitates welfare analysis of exogenous policy and price changes, is used empirically to study the effects of an increased CO₂ tax. In particular, we focus on the effect of including substitution between households choice of the number of trips and days to spend at a destination in the welfare analysis. The analysis reveals that the equivalent variation (EV) measure, for the count data demand system, can be seen as an upper bound for the households welfare loss. Approximating the welfare loss by the change in consumer surplus, accounting for the positive effect from longer stays, imposes a lower bound on the households welfare loss. The difference in the estimated loss measures, from the considered CO₂ tax reform, is about 20%. This emphasizes the importance of accounting for substitutions toward longer stays in travel demand policy evaluations.     

Should BEVs be subsidized or taxed? A European perspective based on the economic value of CO2 emissions

Battery Electric vehicles (BEVs) are generally considered as potentially contributing to the reduction of CO₂ emissions. Consequently, many countries have promoted (or are in the process of promoting) policies aimed at directly or indirectly subsidizing BEVs to accelerate their market uptake. The aim of this paper is to assess whether BEVs’ subsidies are justified (and by what amount) with reference to the carbon component, distinguishing by car segments and countries. To address these research questions, a simulation model is developed, based on the most recent and reliable data available. The model estimates and monetizes the Well-to-Wheel CO₂ emissions of six car segments in 28 European countries. The monetary value of the difference of the CO₂ emissions between the non-BEVs and the BEVs ranges from −€1133 (tax) to +€3192 (subsidy), depending on the car segment and on the nation considered. These results are then compared to the policies about alternative fuels adopted by the single EU countries, suggesting in some cases the necessity to rethink such incentives.     

Would personal carbon trading reduce travel emissions more effectively than a carbon tax?

The application of personal carbon trading (PCT) to transport choices has recently been considered in the literature as a means of reducing CO₂ emissions. Its potential effectiveness in changing car travel behavior is compared to the conventional carbon tax (CT) by means of a stated preferences survey conducted among French drivers (N ∼ 300). We show evidence that PCT could effectively change travel behavior and hence reduce transport emissions from personal travel. There is however a definite reluctance to reduce car travel. We were unable to demonstrate any significant difference between the effectiveness of PCT and the CT with regard to changing travel behavior. However, in the experiment, the PCT scheme provided consistent results while this was not the case for the CT scheme. Further research is needed into the “social norm” conveyed by a personal emissions allowance.     

On a pathway to de-carbonization – A comparison of new passenger car CO2 emission standards and taxation measures in the G20 countries

Considering the role of transport for a 1.5 Degree stabilization pathway and the importance of light-duty vehicle fuel efficiency within that, it is important to understand the key elements of a policy package to shape the energy efficiency of the vehicle fleet. This paper presents an analysis focusing on three types of policy measures: (1) CO₂ emission standards for new vehicles, (2) vehicle taxation directly and indirectly based on CO₂ emission levels, and (3) fuel taxation. The paper compares the policies in the G20 economies and estimates the financial impact of those policies using the example of a Ford Focus vehicle model. This analysis is a contribution to the assessment of the role of the transport sector in global decarbonisation efforts. The findings of this paper show that only an integrated approach of regulatory and fiscal policy measures can yield substantial efficiency gains in the vehicle fleet and can curb vehicle kilometres travelled by individual motorised transport. Using the illustrative example of one vehicle model, the case study analysis shows that isolated measures, e.g. fuel efficiency regulation without corresponding fuel and vehicle taxes only have minor CO₂ emission reduction effects and that policy measures need to be combined in order to achieve substantial emission reduction gains over time. The analysis shows that the highest level of impact is achieved by a combination regulatory and fiscal policies rather than only one policy even if this policy is more aggressive. When estimating the quantitative effect of fuel efficiency standards, vehicle and fuel tax, the analysis shows that substantial gains with regard to CO₂ emission are only achieved at a financial impact level above 500 Euros over a four year period.     

Vehicle type choice under the influence of a tax reform and rising fuel prices

Differentiated vehicle taxes are considered by many a useful tool for promoting environmentally friendly vehicles. Various structures have been implemented in several countries, e.g. Ireland, France, The Czech Republic, and Denmark. In many countries the tax reforms have been followed by a steep change in new vehicle purchases toward more diesel vehicles and more fuel-efficient vehicles. The paper analyses to what extent a vehicle tax reform similar to the Danish 2007 reform may explain changes in purchasing behaviour. The paper investigates the effects of a tax reform, fuel price changes, and technological development on vehicle type choice using a mixed logit model. The model allows a simulation of the effect of car price changes that resemble those induced by the tax reform. This effect is compared to the effects of fuel price changes and technology improvements. The simulations show that the effect of the tax reform on fuel efficiency is similar to the effect of rising fuel prices while the effect of technological development is much larger. The conclusion is that while the tax reform appeared in the same year as a large increase in fuel efficiency, it seems likely that it only explains a small part of the shift in fuel efficiency that occurred and that the main driver was the technological development.     

Bunker levy schemes for greenhouse gas (GHG) emission reduction in international shipping

A fuel levy is one of the market-based measures (MBMs) currently under consideration at the International Maritime Organization. MBMs have been proposed to improve the energy efficiency of the shipping sector and reduce its emissions. This paper analyses the economic and environmental implications of two types of levy on shipping bunker fuels by means of an analytical model built on the cobweb theorem. A unit-tax per ton of fuel and an ad-valorem tax, enforced as a percentage of fuel prices, are examined. In both cases, a speed and fuel-consumption reduction equivalent to an improvement in the energy efficiency of the sector would be expected as a result of the regulation enforcement. The speed reduction in the unit-tax case depends on fuel prices and the tax amount, whereas in the ad-valorem case it relies upon the enforced tax percentage.Both schemes lead to industry profit decline, the extent of which depend on the structure of the levy and market conditions. Since there is concern that the costs resulting from the policy will be passed from shipping companies to their customers along the supply chain, the paper dwells on how the costs arising from the enforcement of the levy will be actually allocated between ship-owners and operators, and cargo-owners. In a market characterised by high freight rates and with no or limited excess capacity, a higher percentage of the total tax amount is transferred from ship-owners to shippers. In case of a recession the opposite happens.     

Petrol expenditure and redistributive effects of its taxation in Spain

The objective of this paper is to estimate a petrol expenditure function for Spain and to evaluate the redistributive effects of petrol taxation. We use micro data from the Spanish Household Budget Survey of 1990/91 and model petrol expenditure taking into account the effect that income changes may have on car ownership levels, as well as the differences that exist between reported expenditure and real consumption during the week of reference. Our results show the importance that household structure, place of residence and income have on petrol expenditure patterns. We are able to compute income elasticities of petrol expenditure, both conditional and unconditional on the level of car ownership. Non-conditional elasticities, while always very close to unit values, are lower for higher income households and for those living in rural areas or small cities. When car ownership levels are taken as fixed, the conditional elasticity obtained is around one half the value of the non-conditional ones. As regards the redistributive effects of petrol taxation, we observe that for the lowest income deciles the share of petrol expenditure increases with income, and thus the tax can be regarded as progressive. However, after a certain income level the tax proves to be regressive.     

Optimal congestion taxes in a time allocation model

The purpose of this paper is to study optimal congestion taxes in a time-allocation framework. This makes it possible to distinguish taxes on inputs in the production of car trips and taxes on transport as an activity. Moreover, the model allows us to consider the implications of treating transport as a demand, derived from other activities. We extend several well known tax rules from the public finance literature and carefully interpret the implications for the optimal tax treatment of passenger transport services. The main findings of the paper are the following. First, if governments are limited to taxing market inputs into transport trip production, the time-allocation framework: (i) provides an argument for taxing congestion below marginal external cost, (ii) implies a favourable tax treatment for time-saving devices such as GPS, and (iii) provides a previously unnoticed argument for public transport subsidies. Second, if the government has access to perfect road pricing that directly taxes transport as an activity, all previous results disappear. Third, in the absence of perfect road pricing, the activity-specific congestion attracted by employment centres, by shopping centres or by large sports and cultural events should be corrected via higher taxes on market inputs in these activities (e.g., entry tickets, parking fees, etc.).     

The development of a policy for road tax in Turkey, using a genetic algorithm approach for demand estimation

This study deals, first, with estimation of transport demand based on Genetic Algorithm (GA) approach, and then deals with the evaluation of the road tax system in Turkey. It proposes an alternative road tax policy. The total transport demand is estimated based on population, Gross Domestic Product per Capita (GDPPC), and vehicle-number. Three forms of the Genetic Algorithm Transport Demand Estimation for Tax Revenues (GATDETR) are developed, of which one is linear, and the second and third are exponential forms of the mathematical expressions. The best-fit GATDETR model in terms of total minimum relative average errors between observed and estimated values are selected for future demand estimation. The evaluation of the road tax system and policy proposal is made based on estimated demand. The Distance-Based-Taxation (DBT) system is proposed in order to control highway transport. With the DBT system, some road users may wish to use railway. Thus, we re-organize the railways in order to meet the demand, but this requires new fund. The DBT system may help to create to this fund. It may also help to develop fair-taxation for the road users. Results show that the GA can be used to model transport demand and hence income tax in future transports planning. This study also suggests that planning the taxation in highway transport may help to ease funding problem of railway system.