Policy Instruments for Greenhouse Gas Abatement in Transport

Policy Instruments for Greenhouse Gas Abatement in Transport


Lasse Fridstrøm, Institute of Transport Economics (TØI), Christian Steinsland, Institute of Transport Economics (TØI), Vegard Østli, Institute of Transport Economics (TØI)


The paper explores the greenhouse gas abatement potential of various policy instruments as applied in Norway. The focus is on vehicle and fuel taxation, road tolls, and public transport enhancement.


Roughly one half of the greenhouse gas (GHG) emissions in the European Union are not covered by the EU cap-and-trade system (ETS). Among the non-ETS sectors, transport is the most important, as measured in tonnes of CO2 equivalents (tCO2e).

While a consensus is emerging on the quantifiable goals for non-ETS GHG abatement in Europe, much less is known about the most efficient policy instruments to achieve these goals. Indeed, it is fair to say that goals have been fixed without proper knowledge on whether there are policy measures available that will make the goals attainable.

The aim of the TEMPO project (Transport and Environment, Measures and POlicies) has been to help fill this gap, by analysing the effects of various potential policy measures, and of certain combinations thereof, as applied in Norway. In this paper, we focus on vehicle and fuel taxation, road tolls, and public transport enhancement.

The analysis is supported by simulations made by means of the existing Norwegian short and long distance travel demand models, and by a comprehensive, new model system for the passenger car fleet, which follows each cohort of vehicles through their lifetime.

Contrary to widespread belief, passenger vehicle taxation has a far greater potential for long term GHG abatement than fuel taxes. Continued application of a CO2 graduated vehicle purchase tax may halve the fossil fuel consumption of cars within two or three decades. Taking account of the rebound effect, emissions from short haul travel may, under Norwegian conditions, come down by about 40 per cent, all modes considered. On long haul domestic trips, the lower variable cost of car use may dampen air travel demand, resulting in a final emissions reduction almost equivalent to 50 per cent of the initial emissions from cars.

By comparison, a drastically increased fuel tax will have a much smaller impact. A 50 per cent increase in the price of petrol and diesel will lead to only 10-12 per cent less emissions on short haul trips, all modes taken together. On long haul trips, the effect is practically zero, partly – again – on account of the competition between air and road.

Improving the fuel efficiency of cars may entail large energy savings in the long run. Electrification seems like a particularly powerful strategy, since the fuel efficiency of the electric motor is roughly three times superior to that of the internal combustion engine. Also, since all power plants in the EU are covered by the ETS cap, electrification means moving certain parts of transport into the ETS sector.

Public transport enhancement, while playing a highly important part in urban development and for the quality of living, has a more modest potential for GHG abatement. According to model simulations, even very ambitious policy packages, involving drastically reduced fares, increases departure frequency, and higher travel speed, fail to achieve more than a few percentage points’ reduction in GHG emissions from transport.

The paper will report on a large number of scenario simulations, using the travel demand models as well as the new cohort model for the passenger car fleet. Output is conveyed in the form of travel demand and CO2 emissions effects, as well as costs to the public treasury.


Association for European Transport