Greening the Dutch Car Fleet : the Role of Differentiated Purchase Taxes



Greening the Dutch Car Fleet : the Role of Differentiated Purchase Taxes

Authors

Jordy Van Meerkerk, PBL Netherlands Environmental Assessment Agency, Gusta Renes, PBL Netherlands Environmental Agency, Geert Ridder, Department Of Economics, University Of Southern California

Description

In the Netherlands a number of taxes target both car purchase, car ownership and car use, for example an excise tax on fuel targets car use while a vehicle purchase tax (VPT) and a road tax target car purchase and car ownership respectively.

Abstract

In the Netherlands a number of taxes target both car purchase, car ownership and car use, for example an excise tax on fuel targets car use while a vehicle purchase tax (VPT) and a road tax target car purchase and car ownership respectively. Since 2006 the car taxes became increasingly dependent on the CO2-emission. For instance, a surcharge for very inefficient cars (Dutch: slurptax) was introduced in 2008 and 2009 and in 2010 a progressive tax system for the VPT followed. The VPT for newly purchased cars was made (progressively) dependent on the absolute CO2-emission level of the car. As a consequence small fuel-efficient cars became cheaper and the price of gas guzzlers increased.
We are interested in estimating the parameters of probability of purchasing a type of vehicle. To this end we used data of approximately 3.700 respondents with privately owned cars who were selected from a Dutch automotive internet panel maintained by the market research firm TNS-NIPO. The data comprises a stratified random sample from the population of Dutch households. The strata are defined by ownership of a new or second-hand car and by fuel type. Therefore the sample is choice based for which we corrected in the estimation of the model.

In estimating the model we use car attributes and household characteristics. For car attributes we included the purchase price, variable costs, the road tax, the cylinder capacity and the range of car models available on the market. For household characteristics we used household income, household size and mileage.

All price coefficients are negative as expected. Low income households are more price sensitive compared to high income households. Variable cost has a negative coefficient as well and this effect increases with mileage. Households with a high annual mileage are more sensitive to variable cost per kilometer than households who drive fewer miles.

Furthermore, the results show that larger (heavier) cars are preferred over smaller (lighter) cars and that new cars are preferred over used cars. The preference for larger cars increases with household size as expected.

The differentiation of the purchase tax seems to be rather effective. Model simulations show that the differentiation of the purchase tax led to an increase in the share of small petrol and small diesel cars. Based on the estimated coefficients we show that a substantial increase in fuel price is needed to attain the same increase in the share of small petrol cars and small diesel cars.

Publisher

Association for European Transport