CO2 Related Car Taxation in The Netherlands: Effects on Car Sales, Car Use and CO2 Emissions
Gerben Geilenkirchen, PBL Netherlands Environmental Assessment Agency, Gusta Renes, PBL Netherlands Environmental Assessment Agency, Jordy van Meerkerk, PBL Netherlands Environmental Assessment Agency
This paper examines recent changes in vehicle taxes in the Netherlands, including the introduction of a surcharge for fuel inefficient vehicles (gas guzzler tax) and the introduction of a progressive CO2 related registration tax.
As part of the strategy to reduce carbon dioxide (CO2) emissions from passenger cars, the EU in 2008 adopted mandatory CO2 emission standards for new passenger cars. To promote the purchase of fuel efficient vehicles with low CO2 emissions and to help manufacturers achieve their targets, Member States are encouraged to adapt their car taxation schemes towards fuel efficient vehicles. In the Netherlands, registration, circulation and fuel taxes target both car purchase, car ownership and fuel use. Since 2008, passenger car taxation has become increasingly dependent on the CO2-emissions of the vehicle. This paper examines recent changes in vehicle taxes in the Netherlands, including the introduction of a surcharge for fuel inefficient vehicles (gas guzzler tax) and the introduction of a progressive CO2 related registration tax.
The ‘greening’ of passenger car taxation has led to a major reduction in the average CO2 emissions of new passenger cars in The Netherlands. EU-wide, average CO2 emissions of new passenger cars decreased by 4% annually between 2008 and 2011. The Netherlands however saw an average annual reduction of 7% in this time span, best in the EU-27. In 2012, average CO2 emissions dropped to 119 g/km, far below the 2015 (EU-average) target of 130 g/km, indicating that the greening of passenger car taxation has been successful. The shift to low-emitting cars has led to a major decrease in tax revenues though, with average tax rates per vehicle dropping significantly. This raises concerns about rebound effects on car sales, car ownership and car usage, potentially mitigating some of the CO2 reductions caused by the introduction of low-emitting cars into the car fleet. Recent studies have also shown that real-world fuel efficiency is not decreasing as rapidly as changes in type approval efficiency would indicate: the difference between test and real-world fuel efficiency seems to be increasing as type approval fuel efficiency has improved. This raises concerns about the effectiveness and efficiency of the changes in the tax regime in terms of reducing (real-world) CO2 emissions.
To estimate the effects of the recent changes in passenger car taxation, we used an online survey to collect data on vehicle type choice of private car buyers in the Netherlands. This data was subsequently used to re-estimate the type choice model of the Dutch passenger car model Dynamo. Dynamo is a dynamic auto market model which estimates the size, composition and usage of the Dutch passenger car fleet, taking into account the effects of socio-economic and policy developments. In this paper, we use Dynamo to calculate the effects of the recent changes in the fiscal scheme on size, composition and usage of both the new and the entire car fleet in the Netherlands. We also calculate resulting CO2 emission reductions.
Fuel prices also influence the purchase of small and fuel efficient cars. Fuel taxes therefore can also be used to increase the share of fuel efficient vehicles. We show that large increases of fuel taxes would be required in order to achieve similar increases of market shares of small fuel efficient cars. Fuel taxes impact the entire vehicle fleet though and also affect car use, therefore associated CO2 emissions reductions are higher. Nevertheless, CO2 related registration taxes seem to be an effective way to speed up the market introduction of fuel efficient vehicles, implying that they could also be used to speed up market penetration of alternative fuel vehicle. A phase-out of registration taxes, as was proposed by the European Commission in 2005, might not be effective in terms of reducing CO2 emissions of new passenger cars.
Based on the results of Dynamo, we estimate the cost effectiveness of recent fiscal policies in The Netherlands to reduce CO2 emissions and compare these estimates with cost effectiveness estimates of other policy instruments to improve fuel efficiency and reduce CO2 emissions of passenger cars.
Association for European Transport