The Impact of Tax Reform on New Car Purchases in Ireland
We examine the impact of recent tax reforms in Ireland on private car transport and its greenhouse gas emissions. A carbon tax was introduced on fuels, and purchase (vehicle registration) and ownership (motor) taxes were switched from engine size to potential emissions. We use a demographic model of the car stock (by age, size, and fuel) and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes. The model shows a dramatic shift from petrol to diesel cars, particularly for large engines. The same pattern is observed in the latest data on car sales. This has a substantial impact on tax revenue as car owners shift to the lower tax rates. The tax burden has shifted from car ownership to car use, and that the overall tax burden on private car transport falls. As diesel engines are more fuel efficient than petrol engines, carbon dioxide emissions fall modestly or, if we consider the rebound effect of travel costs on mileage, minimally. From the perspective of the revenue, the costs per tonne of carbon dioxide avoided are (very) high.
|Date of creation:||Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (353-1) 863 2000
Fax: (353-1) 863 2100
Web page: http://www.esri.ie
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Inge Mayeres & Stef Proost, 2000.
"Should diesel cars in Europe be discouraged?,"
Energy, Transport and Environment Working Papers Series
ete0005, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
- Ryan, Lisa & Ferreira, Susana & Convery, Frank, 2009. "The impact of fiscal and other measures on new passenger car sales and CO2 emissions intensity: Evidence from Europe," Energy Economics, Elsevier, vol. 31(3), pages 365-374, May.
- Ian W. H. Parry & Kenneth A. Small, 2005.
"Does Britain or the United States Have the Right Gasoline Tax?,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1276-1289, September.
- Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
- Pock, Markus, 2010. "Gasoline demand in Europe: New insights," Energy Economics, Elsevier, vol. 32(1), pages 54-62, January.
- Stef Proost & Kurt Van Dender & Christoph Courcelle & John Peirson & Duncan Sharp, 2001.
"How large is the gap between present and efficient transport prices in Europe?,"
in: Reforming Transport Pricing in the European Union, chapter 17
- Proost, S. & Van Dender, K. & Courcelle, C. & De Borger, B. & Peirson, J. & Sharp, D. & Vickerman, R. & Gibbons, E. & O'Mahony, M. & Heaney, Q. & Van den Bergh, J. & Verhoef, E., 2002. "How large is the gap between present and efficient transport prices in Europe?," Transport Policy, Elsevier, vol. 9(1), pages 41-57, January.
- Stef Proost & Kurt Van Dender & C. Courcelle & B. De Borger & J. Peirson & D. Sharp & R. Vickerman & E. Gibbons & M. O'Mahony & Q. Heaney & J. Van den Bergh & E. Verhoef, 2001. "How large is the gap between present and efficient transport prices in Europe?," Energy, Transport and Environment Working Papers Series ete0120, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- James E. Prieger, 2004. "An Empirical Investigation of Biased Survey Data and an Attempted Cure," Working Papers 44, University of California, Davis, Department of Economics.
- Frank Verboven, 2002. "Quality-Based Price Discrimination and Tax Incidence: Evidence from Gasoline and Diesel Cars," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 275-297, Summer.
- Brownstone, David & Train, Kenneth, 1999.
"Forecasting new product penetration with flexible substitution patterns,"
University of California Transportation Center, Working Papers
qt1j6814b3, University of California Transportation Center.
- Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
- Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt3tb6j874, University of California Transportation Center.
- Pim Heijnen & Peter Kooreman, 2006. "Modelling Strategic Responses to Car and Fuel Taxation," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 40(2), pages 203-223, May.
- Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
- Mandell, Svante, 2008.
"Policies towards a more efficient car fleet,"
2008:12, Swedish National Road & Transport Research Institute (VTI).
- Mariuzzo, Franco & Walsh, Patrick Paul & van Parys, Olivier, 2009. "Estimating the Price Overcharge from Cartelisation of the Irish Automobile Industry," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 165–182.
- Hennessy, Hugh & Tol, Richard S. J., 2010. "The Impact of Climate Policy on Private Car Ownership in Ireland," Papers WP342, Economic and Social Research Institute (ESRI).
- Kunert, Uwe & Kuhfeld, Hartmut, 2007.
"The diverse structures of passenger car taxation in Europe and the EU Commissions proposal for reform,"
Elsevier, vol. 14(4), pages 306-316, July.
- Uwe Kunert & Hartmut Kuhfeld, 2006. "The Diverse Structures of Passenger Car Taxation in Europe and the EU Commissions Proposal for Reform," Discussion Papers of DIW Berlin 589, DIW Berlin, German Institute for Economic Research.
- Rouwendal, Jan & de Vries, Frans, 1999. "The taxation of drivers and the choice of car fuel type," Energy Economics, Elsevier, vol. 21(1), pages 17-35, February.
- Giblin, S. & McNabola, A., 2009. "Modelling the impacts of a carbon emission-differentiated vehicle tax system on CO2 emissions intensity from new vehicle purchases in Ireland," Energy Policy, Elsevier, vol. 37(4), pages 1404-1411, April.
- Schipper, Lee, 2009. "Fuel economy, vehicle use and other factors affecting CO2 emissions from transport," Energy Policy, Elsevier, vol. 37(10), pages 3711-3713, October.
- Ó Gallachóir, Brian P. & Howley, Martin & Cunningham, Stephen & Bazilian, Morgan, 2009. "How private car purchasing trends offset efficiency gains and the successful energy policy response," Energy Policy, Elsevier, vol. 37(10), pages 3790-3802, October.
- Cowi A/S, 2002. "Fiscal Measures to Reduce CO2 Emissions from New Passenger Cars," Taxation Studies 0008, Directorate General Taxation and Customs Union, European Commission.
- Bresnahan, Timothy F & Schmalensee, Richard, 1987. "The Empirical Renaissance in Industrial Economics: An Overview," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 371-78, June.
- Proost, Stef & Van Dender, Kurt, 2001. "The welfare impacts of alternative policies to address atmospheric pollution in urban road transport," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 383-411, July.
- Andrew Kelly, J. & Ryan, Lisa & Casey, Edward & O'Riordan, Niall, 2009. "Profiling road transport activity: Emissions from 2000 to 2005 in Ireland using national car test data," Transport Policy, Elsevier, vol. 16(4), pages 183-192, August.
- Shanjun Li & Roger von Haefen & Christopher Timmins, 2008.
"How Do Gasoline Prices Affect Fleet Fuel Economy?,"
NBER Working Papers
14450, National Bureau of Economic Research, Inc.
- Böhringer, Christoph & Rutherford, Thomas F. & Tol, Richard S. J., 2009. "The EU 20/20/2020 Targets: An Overview of the EMF22 Assessment," Papers WP325, Economic and Social Research Institute (ESRI).
When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp349. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Burns)
If references are entirely missing, you can add them using this form.