Accelerating the transformation to a low carbon passenger transport system: the role of car purchase taxes, feebates, road taxes and scrappage incentives in the UK

Christian Brand, Jillian Anable, Martino Tran

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Abstract

The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car use.

The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO2 grading and tightening of CO2 limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.

The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward ‘low carbon’ and penalize ‘high carbon’. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.
Original languageEnglish
Pages (from-to)132-148
Number of pages17
JournalTransportation Research. Part A, Policy and Practice
Volume49
Early online date3 Jan 2013
DOIs
Publication statusPublished - Mar 2013

Fingerprint

transport system
Taxation
purchase
taxes
Railroad cars
life cycle
incentive
road
taxation
Carbon
revenue
Life cycle
Gas emissions
Greenhouse gases
neutrality
pricing
Purchasing
scenario
government revenue
marginal costs

Keywords

  • transport
  • carbon emissions
  • fiscal policy
  • scenario analysis
  • transport policy
  • greenhouse gas emissions
  • purchase tax
  • road tax
  • feebate
  • scrappage rebate

Cite this

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title = "Accelerating the transformation to a low carbon passenger transport system: the role of car purchase taxes, feebates, road taxes and scrappage incentives in the UK",
abstract = "The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car use.The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO2 grading and tightening of CO2 limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward ‘low carbon’ and penalize ‘high carbon’. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.",
keywords = "transport, carbon emissions, fiscal policy, scenario analysis, transport policy, greenhouse gas emissions, purchase tax, road tax, feebate, scrappage rebate",
author = "Christian Brand and Jillian Anable and Martino Tran",
note = "Acknowledgments This research was funded by the UK Research Councils (Grant No: NERC NE/G007748/1) as part of the Energy Demand Theme of the UK Energy Research Centre (UKERC). We want to thank the two anonymous reviewers for the constructive comments and suggestions which were a great help to improve the manuscript.",
year = "2013",
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T1 - Accelerating the transformation to a low carbon passenger transport system

T2 - the role of car purchase taxes, feebates, road taxes and scrappage incentives in the UK

AU - Brand, Christian

AU - Anable, Jillian

AU - Tran, Martino

N1 - Acknowledgments This research was funded by the UK Research Councils (Grant No: NERC NE/G007748/1) as part of the Energy Demand Theme of the UK Energy Research Centre (UKERC). We want to thank the two anonymous reviewers for the constructive comments and suggestions which were a great help to improve the manuscript.

PY - 2013/3

Y1 - 2013/3

N2 - The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car use.The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO2 grading and tightening of CO2 limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward ‘low carbon’ and penalize ‘high carbon’. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.

AB - The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car use.The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO2 grading and tightening of CO2 limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward ‘low carbon’ and penalize ‘high carbon’. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.

KW - transport

KW - carbon emissions

KW - fiscal policy

KW - scenario analysis

KW - transport policy

KW - greenhouse gas emissions

KW - purchase tax

KW - road tax

KW - feebate

KW - scrappage rebate

U2 - 10.1016/j.tra.2013.01.010

DO - 10.1016/j.tra.2013.01.010

M3 - Article

VL - 49

SP - 132

EP - 148

JO - Transportation Research. Part A, Policy and Practice

JF - Transportation Research. Part A, Policy and Practice

SN - 0965-8564

ER -