IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v128y2023ics0140988323006230.html
   My bibliography  Save this article

Taxation of fuel and vehicles when emissions are constrained

Author

Listed:
  • Bjertnæs, Geir H.M.

Abstract

A tax on fuel combined with tax exemptions or subsidies for low- and zero emission vehicles is implemented in many countries to fulfill the Paris agreement and to curb mileage-related externalities from road traffic. The present study however shows that a tax on fuel should be combined with tax exemptions for high-emission vehicles to curb mileage-related externalities and to fulfill emission targets within the transport sector. The emission target is fulfilled by adjusting the CO2-tax component on fuel. The road user charge on fuel is designed to curb mileage-related externalities. The heavier tax on low- and zero emission vehicles prevent motorists from avoiding the road user charge on fuel by purchasing low- and zero emission vehicles.

Suggested Citation

  • Bjertnæs, Geir H.M., 2023. "Taxation of fuel and vehicles when emissions are constrained," Energy Economics, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:eneeco:v:128:y:2023:i:c:s0140988323006230
    DOI: 10.1016/j.eneco.2023.107125
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988323006230
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2023.107125?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Antón-Sarabia, Arturo & Hernández-Trillo, Fausto, 2014. "Optimal gasoline tax in developing, oil-producing countries: The case of Mexico," Energy Policy, Elsevier, vol. 67(C), pages 564-571.
    2. Fullerton, Don & West, Sarah E., 2002. "Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 135-157, January.
    3. Xing, Jianwei & Leard, Benjamin & Li, Shanjun, 2021. "What does an electric vehicle replace?," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    4. Prateek Bansal & Rubal Dua, 2022. "Fuel consumption elasticities, rebound effect and feebate effectiveness in the Indian and Chinese new car markets," Papers 2201.08995, arXiv.org.
    5. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, vol. 103(1), pages 220-256, February.
    6. Cristian Huse & Claudio Lucinda, 2014. "The Market Impact and the Cost of Environmental Policy: Evidence from the Swedish Green Car Rebate," Economic Journal, Royal Economic Society, vol. 124(578), pages 393-419, August.
    7. Sheldon, Tamara L. & Dua, Rubal, 2018. "Gasoline savings from clean vehicle adoption," Energy Policy, Elsevier, vol. 120(C), pages 418-424.
    8. Mathias Reynaert & James M. Sallee, 2021. "Who Benefits When Firms Game Corrective Policies?," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 372-412, February.
    9. Jacobs, Bas & de Mooij, Ruud A., 2015. "Pigou meets Mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 90-108.
    10. Montag, Josef, 2015. "The simple economics of motor vehicle pollution: A case for fuel tax," Energy Policy, Elsevier, vol. 85(C), pages 138-149.
    11. De Borger, Bruno, 2001. "Discrete choice models and optimal two-part tariffs in the presence of externalities: optimal taxation of cars," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 471-504, July.
    12. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    13. Karplus, Valerie J. & Paltsev, Sergey & Babiker, Mustafa & Reilly, John M., 2013. "Should a vehicle fuel economy standard be combined with an economy-wide greenhouse gas emissions constraint? Implications for energy and climate policy in the United States," Energy Economics, Elsevier, vol. 36(C), pages 322-333.
    14. Kessler, Louise & Morvillier, Florian & Perrier, Quentin & Rucheton, Keyvan, 2023. "An ex-ante evaluation of the French car feebate," Energy Policy, Elsevier, vol. 173(C).
    15. Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2016. "Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors," American Economic Review, American Economic Association, vol. 106(12), pages 3700-3729, December.
    16. Sallee, James M. & West, Sarah E. & Fan, Wei, 2016. "Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations," Journal of Public Economics, Elsevier, vol. 135(C), pages 61-73.
    17. Hunt Allcott & Nathan Wozny, 2014. "Gasoline Prices, Fuel Economy, and the Energy Paradox," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 779-795, December.
    18. Kenneth T. Gillingham & Sébastien Houde & Arthur A. van Benthem, 2021. "Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 13(3), pages 207-238, August.
    19. Henrik Hammar, Asa Lofgren and Thomas Sterner, 2004. "Political Economy Obstacles to Fuel Taxation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
    20. Anders Skonhoft & Bjart Holtsmark, 2014. "The Norwegian support and subsidy of electric cars. Should it be adopted by other countries?," Working Paper Series 15814, Department of Economics, Norwegian University of Science and Technology.
    21. Peter A. Diamond, 1973. "Consumption Externalities and Imperfect Corrective Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 526-538, Autumn.
    22. Yan, Shiyu & Eskeland, Gunnar S., 2018. "Greening the vehicle fleet: Norway's CO2-Differentiated registration tax," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 247-262.
    23. Fullerton Don & West Sarah E, 2010. "Tax and Subsidy Combinations for the Control of Car Pollution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, February.
    24. Bansal, Prateek & Dua, Rubal, 2022. "Fuel consumption elasticities, rebound effect and feebate effectiveness in the Indian and Chinese new car markets," Energy Economics, Elsevier, vol. 113(C).
    25. 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.
    26. Mark R. Jacobsen, 2013. "Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 148-187, May.
    27. Michael L. Anderson & Maximilian Auffhammer, 2014. "Pounds That Kill: The External Costs of Vehicle Weight," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 535-571.
    28. Innes, Robert, 1996. "Regulating Automobile Pollution under Certainty, Competition, and Imperfect Information," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 219-239, September.
    29. William Jaeger, 2011. "The Welfare Effects of Environmental Taxation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(1), pages 101-119, May.
    30. Pinelopi Koujianou Goldberg, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 1-33, March.
    31. Parry, I. W. H., 2002. "Comparing the efficiency of alternative policies for reducing traffic congestion," Journal of Public Economics, Elsevier, vol. 85(3), pages 333-362, September.
    32. Tamara L. Sheldon, Rubal Dua, and Omar Abdullah Alharbi, 2023. "How Cost-effective are Electric Vehicle Subsidies in Reducing Tailpipe-CO2 Emissions? An Analysis of Major Electric Vehicle Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    33. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    34. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    35. Alberini, Anna & Bareit, Markus & Filippini, Massimo & Martinez-Cruz, Adan L., 2018. "The impact of emissions-based taxes on the retirement of used and inefficient vehicles: The case of Switzerland," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 234-258.
    36. Sandmo, Agnar, 1978. "Direct versus indirect pigovian taxation," European Economic Review, Elsevier, vol. 7(4), pages 337-349, May.
    37. Sheldon, Tamara L. & Dua, Rubal, 2019. "Measuring the cost-effectiveness of electric vehicle subsidies," Energy Economics, Elsevier, vol. 84(C).
    38. Sheldon, Tamara L. & Dua, Rubal, 2021. "How responsive is Saudi new vehicle fleet fuel economy to fuel-and vehicle-price policy levers?," Energy Economics, Elsevier, vol. 97(C).
    39. Bjertnæs, Geir H. & Tsygankova, Marina & Martinsen, Thomas, 2013. "Norwegian climate policy reforms in the presence of an international quota market," Energy Economics, Elsevier, vol. 39(C), pages 147-158.
    40. Thomas Klier & Joshua Linn, 2015. "Using Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 212-242, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Geir H. M. Bjertnæs, 2021. "Taxation of fuel and vehicles when emissions are constrained," Discussion Papers 949, Statistics Norway, Research Department.
    2. Geir H. M. Bjertnaes, 2017. "The Efficient Combination of Taxes on Fuel and Vehicles," CESifo Working Paper Series 6789, CESifo.
    3. Geir H. M. Bjertnæs, 2017. "The efficient combination of taxes on fuel and vehicles," Discussion Papers 867, Statistics Norway, Research Department.
    4. Geir H. M. Bjertnaes, 2019. "Efficient Taxation of Fuel and Road Use," CESifo Working Paper Series 8019, CESifo.
    5. Geir H. M. Bjertnæs, 2019. "Efficient taxation of fuel and road use," Discussion Papers 905, Statistics Norway, Research Department.
    6. Verboven, Frank & Grigolon, Laura & Reynaert, Mathias, 2014. "Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market," CEPR Discussion Papers 10301, C.E.P.R. Discussion Papers.
    7. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    8. Lucas W. Davis & James M. Sallee, 2020. "Should Electric Vehicle Drivers Pay a Mileage Tax?," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 65-94.
    9. Allcott, Hunt & Mullainathan, Sendhil & Taubinsky, Dmitry, 2014. "Energy policy with externalities and internalities," Journal of Public Economics, Elsevier, vol. 112(C), pages 72-88.
    10. Konishi, Yoshifumi & Kuroda, Sho, 2023. "Why is Japan’s carbon emissions from road transportation declining?," Japan and the World Economy, Elsevier, vol. 66(C).
    11. Rik L. Rozendaal & Herman R. J. Vollebergh, 2021. "Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market," CESifo Working Paper Series 9422, CESifo.
    12. Koichiro Ito & James M. Sallee, 2018. "The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel Economy Standards," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 319-336, May.
    13. Alberini, Anna & Horvath, Marco, 2021. "All car taxes are not created equal: Evidence from Germany," Energy Economics, Elsevier, vol. 100(C).
    14. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    15. Sallee, James M. & West, Sarah E. & Fan, Wei, 2016. "Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations," Journal of Public Economics, Elsevier, vol. 135(C), pages 61-73.
    16. Yujie Lin & Joshua Linn, 2023. "Environmental Regulation and Product Attributes: The Case of European Passenger Vehicle Greenhouse Gas Emissions Standards," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 1-32.
    17. Antonio M. Bento & Mark R. Jacobsen & Christopher R. Knittel & Arthur A. van Benthem, 2020. "Estimating the Costs and Benefits of Fuel-Economy Standards," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 129-157.
    18. Patrick Bigler & Doina Maria Radulescu, 2022. "Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles," CESifo Working Paper Series 9645, CESifo.
    19. Kessler, Louise & Morvillier, Florian & Perrier, Quentin & Rucheton, Keyvan, 2023. "An ex-ante evaluation of the French car feebate," Energy Policy, Elsevier, vol. 173(C).
    20. Don Fullerton & Li Gan & Miwa Hattori, 2015. "A model to evaluate vehicle emission incentive policies in Japan," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(1), pages 79-108, January.

    More about this item

    Keywords

    Transportation; Optimal taxation; Environmental taxation; Global warming;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:128:y:2023:i:c:s0140988323006230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.