Abstract
The report discusses to what degree carbon abatement in the road transport sector can be achieved by fuel taxation, and to what extent such taxes should be complemented by other government-induced measures aimed at improving the fuel efficiency of cars. A second objective is to analyse the need for guidelines for incentives that are introduced in combination with fuel taxation. Against a background of high implicit taxation of carbon emitted from road fuels, there may be cause to question whether there is any need for supplementary policy measures in order to reduce emissions in a cost-effective way. Ideally, each tonne of CO{sub 2} should be equally taxed regardless of where it is emitted. Adopting special measures in the transport sector, thus, could be seen as a deviation from the principle of equal treatment. However, a factor of potential importance in the context of adding policy instruments to the use of carbon taxes is that Europe's current climate change commitment concerns a short-term target (2020) and that more far-reaching measures may be needed in order to reach future longer term objectives. A main conclusion in the report is that the existence of market imperfections and the uncertainty about how fast and
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Citation Formats
Kaageson, Per.
With the climate in mind. Instruments for energy-efficient cars; Med klimatet i tankarna. Styrmedel foer energieffektiva bilar.
Sweden: N. p.,
2010.
Web.
Kaageson, Per.
With the climate in mind. Instruments for energy-efficient cars; Med klimatet i tankarna. Styrmedel foer energieffektiva bilar.
Sweden.
Kaageson, Per.
2010.
"With the climate in mind. Instruments for energy-efficient cars; Med klimatet i tankarna. Styrmedel foer energieffektiva bilar."
Sweden.
@misc{etde_1010774,
title = {With the climate in mind. Instruments for energy-efficient cars; Med klimatet i tankarna. Styrmedel foer energieffektiva bilar}
author = {Kaageson, Per}
abstractNote = {The report discusses to what degree carbon abatement in the road transport sector can be achieved by fuel taxation, and to what extent such taxes should be complemented by other government-induced measures aimed at improving the fuel efficiency of cars. A second objective is to analyse the need for guidelines for incentives that are introduced in combination with fuel taxation. Against a background of high implicit taxation of carbon emitted from road fuels, there may be cause to question whether there is any need for supplementary policy measures in order to reduce emissions in a cost-effective way. Ideally, each tonne of CO{sub 2} should be equally taxed regardless of where it is emitted. Adopting special measures in the transport sector, thus, could be seen as a deviation from the principle of equal treatment. However, a factor of potential importance in the context of adding policy instruments to the use of carbon taxes is that Europe's current climate change commitment concerns a short-term target (2020) and that more far-reaching measures may be needed in order to reach future longer term objectives. A main conclusion in the report is that the existence of market imperfections and the uncertainty about how fast and how far the industrial nations will have to curb their emissions make it useful to regulate the fuel efficiency of new cars and to contemplate complementary use of economic incentives. The cause for regulation is particularly strong when tax resistance makes it difficult or impossible to raise fuel taxes. The need for complementing regulation by incentives aimed at the first buyer is strong when the regulation, as currently happens to be the case in Europe, is full of loop-holes. Complementary incentives would have been less needed had the regulation been free from exemptions and temporary derogations. Most member states of the EU have already introduced financial incentives aimed at fuel consumption or CO{sub 2} emissions from new cars. However, many of the incentives are poorly designed. Most member states use thresholds which provide a strong incentive to manufacturers to make cars that just barely pass the bottom-line of a given band. In total, the current national tax regulations of EU27 encompass 41 different thresholds for CO{sub 2} and numerous different time-tables for the duration of them. These thresholds in combination with large variations in the evaluation of CO{sub 2} make the benefit associated to a reduction by one gram per vehicle km vary between zero and 1,000 Euro. Large variations in vehicle taxation among member states cause a fragmentation of the internal market. The motor industry is forced to cope with differing national incentive systems, which add to the cost of developing and introducing the models. Notably only Germany (annual taxation) and Finland (registration tax) enforce taxes that increase linearly with the emission. The report finds that some degree of European harmonization is needed in order to improve the effectiveness of these instruments. This could be achieved by guidelines or common rules that prevent excessive taxation and that prescribe that all incentives must comply with certain basic principles. For general instruments such as registration and circulation taxes the most important principals are: - Technological neutrality and equal treatment of all cars - Continuous incentive (rather than a number of thresholds) - Fees and bonuses that in size are proportional to the social cost or benefit of reducing emissions For a given size a registration tax is a more effective base for carbon differentiation than a circulation tax. However, a negative consequence of registration taxes is that they make vehicles more expensive which delays the renewal of the existing vehicle fleet. One way of getting around this problem is to design the incentive as a feebate (American jargon) or a bonus-malus (French jargon). The idea in both cases is to make the system more or less budget neutral by enforcing penalties on high-consuming vehicles and use the proceeds for financing grants to low-emitting cars. Several European countries already use feebates or bonus-malus systems. However, none of the existing schemes comply with the principals outlined above. The penalty and the bonus should be set approximately on level with the marginal abatement costs in other sectors of society. One point of departure could be the expected future price of CO{sub 2} allowances in a theoretical case where cap and trade covers emissions from all sectors. Based on such a principle an incentive of up to 15 Euro per gram CO{sub 2} per km could be justified. New technologies often need to go through several stages of development before being ready for broad market introduction. The learning curve or experience curve makes the technology more and more complete and often also less expensive. The economy of scale may be crucial in this context.}
place = {Sweden}
year = {2010}
month = {Dec}
}
title = {With the climate in mind. Instruments for energy-efficient cars; Med klimatet i tankarna. Styrmedel foer energieffektiva bilar}
author = {Kaageson, Per}
abstractNote = {The report discusses to what degree carbon abatement in the road transport sector can be achieved by fuel taxation, and to what extent such taxes should be complemented by other government-induced measures aimed at improving the fuel efficiency of cars. A second objective is to analyse the need for guidelines for incentives that are introduced in combination with fuel taxation. Against a background of high implicit taxation of carbon emitted from road fuels, there may be cause to question whether there is any need for supplementary policy measures in order to reduce emissions in a cost-effective way. Ideally, each tonne of CO{sub 2} should be equally taxed regardless of where it is emitted. Adopting special measures in the transport sector, thus, could be seen as a deviation from the principle of equal treatment. However, a factor of potential importance in the context of adding policy instruments to the use of carbon taxes is that Europe's current climate change commitment concerns a short-term target (2020) and that more far-reaching measures may be needed in order to reach future longer term objectives. A main conclusion in the report is that the existence of market imperfections and the uncertainty about how fast and how far the industrial nations will have to curb their emissions make it useful to regulate the fuel efficiency of new cars and to contemplate complementary use of economic incentives. The cause for regulation is particularly strong when tax resistance makes it difficult or impossible to raise fuel taxes. The need for complementing regulation by incentives aimed at the first buyer is strong when the regulation, as currently happens to be the case in Europe, is full of loop-holes. Complementary incentives would have been less needed had the regulation been free from exemptions and temporary derogations. Most member states of the EU have already introduced financial incentives aimed at fuel consumption or CO{sub 2} emissions from new cars. However, many of the incentives are poorly designed. Most member states use thresholds which provide a strong incentive to manufacturers to make cars that just barely pass the bottom-line of a given band. In total, the current national tax regulations of EU27 encompass 41 different thresholds for CO{sub 2} and numerous different time-tables for the duration of them. These thresholds in combination with large variations in the evaluation of CO{sub 2} make the benefit associated to a reduction by one gram per vehicle km vary between zero and 1,000 Euro. Large variations in vehicle taxation among member states cause a fragmentation of the internal market. The motor industry is forced to cope with differing national incentive systems, which add to the cost of developing and introducing the models. Notably only Germany (annual taxation) and Finland (registration tax) enforce taxes that increase linearly with the emission. The report finds that some degree of European harmonization is needed in order to improve the effectiveness of these instruments. This could be achieved by guidelines or common rules that prevent excessive taxation and that prescribe that all incentives must comply with certain basic principles. For general instruments such as registration and circulation taxes the most important principals are: - Technological neutrality and equal treatment of all cars - Continuous incentive (rather than a number of thresholds) - Fees and bonuses that in size are proportional to the social cost or benefit of reducing emissions For a given size a registration tax is a more effective base for carbon differentiation than a circulation tax. However, a negative consequence of registration taxes is that they make vehicles more expensive which delays the renewal of the existing vehicle fleet. One way of getting around this problem is to design the incentive as a feebate (American jargon) or a bonus-malus (French jargon). The idea in both cases is to make the system more or less budget neutral by enforcing penalties on high-consuming vehicles and use the proceeds for financing grants to low-emitting cars. Several European countries already use feebates or bonus-malus systems. However, none of the existing schemes comply with the principals outlined above. The penalty and the bonus should be set approximately on level with the marginal abatement costs in other sectors of society. One point of departure could be the expected future price of CO{sub 2} allowances in a theoretical case where cap and trade covers emissions from all sectors. Based on such a principle an incentive of up to 15 Euro per gram CO{sub 2} per km could be justified. New technologies often need to go through several stages of development before being ready for broad market introduction. The learning curve or experience curve makes the technology more and more complete and often also less expensive. The economy of scale may be crucial in this context.}
place = {Sweden}
year = {2010}
month = {Dec}
}