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Optimal kilometre tax for electric passenger cars

Author

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  • Börjesson, Maria

    (Swedish National Road & Transport Research Institute (VTI))

  • Asplund, Disa

    (Swedish National Road & Transport Research Institute (VTI))

  • Hamilton, Carl

    (Swedish National Road & Transport Research Institute (VTI))

Abstract

We simulate the external costs from road transport in a 2040 scenario where all gasoline vehicles are replaced by EV’s, and we do this for the densest regions of Sweden with a similar degree of urbanization to many other European countries, including cities, suburbs, towns and rural areas. We analyse the optimal kilometre tax based on three motives for taxing use and ownership of EVs: internalizing external cost, cost recovery of the public spending on the road sector, and fiscal taxation for raising revenue over and above what is justified by the two previous principles. We conclude that the optimal Pigouvian tax will be too low to justify the cost of a nationwide GPS-based kilometre tax for many years ahead, for which enforcement would drive the cost. Taxes collected based on roadside equipment systems in the big cities and surrounding highways would be a substantially cheaper way of internalizing most of the congestion cost. A shift from fuel taxes to national congestion taxes would, however, imply a large transfer of resources from the biggest city or cities to the rest of the country, where most of the kilometres are driven

Suggested Citation

  • Börjesson, Maria & Asplund, Disa & Hamilton, Carl, 2021. "Optimal kilometre tax for electric passenger cars," Working Papers 2021:3, Swedish National Road & Transport Research Institute (VTI).
  • Handle: RePEc:hhs:vtiwps:2021_003
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    More about this item

    Keywords

    Kilometre tax; Milage tax; Congestion charges; Equity; Infrastructure investments; Electric cars; Fiscal taxes; Benefit principle;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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