ICCT report analyses relative effectiveness of national tax policies in cutting CO2
Sat 02 April 2011
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A new report by the International Council on Clean Transportation (ICCT) evaluates eight national tax policies for passenger vehicles which influence CO2 emissions in an attempt to determine a best practive framework for policy design. The UK's policy is in third place in the inter-country policy comparisons in terms of the price signal implied by currently applicable taxes on vehicles.
The ICCT says that governments around the world are increasingly using fiscal policies to influence vehicle purchase decisions and that these policies should be designed to enhance and reinforce regulatory approaches to cutting vehicles' CO2 emissions.
The report's authors suggest that 'stringency and design' are the most important factors in determining the potential CO2 reduction effectiveness of fiscal policies. The report provides a methodology to quantitatively compare the CO2 price signal offered by various existing fiscal policies and also qualitatively compares the design characteristics that influence the potential impact of the policies.
The scope of the analyis includes taxes, rebates and subsidies and other fiscal incentives applied to new private passenger vehicles in eight of the World's leading car markets: UK, USA, France, Germany, Brazil, China, India and Japan.
The UK's policy provides the strongest direct incentive for CO2 reduction in vehicles, but China and Japan's policies translate into higher effective price signals but rely on indirect, attribute-based charges.
On the basis of the analysis, the report proposes quality design criteria to maximise the effectiveness of tax policies aimed at encouraging the manufacture and purchase of low carbon vehicles. These include:
- The policy should be directly linked to vehicle CO2 emissions.
- The policy should apply to the entire vehicle fleet, not a subset of it.
- The policy should set fees which vary continuously across the spectrum of CO2 emissions, as opposed to fees that apply to a limited CO2 range of fees that don't vary across a covered range of emissions levels.
- Policies that apply both at the time of purchase and throughout a vehicle's life influence a consumer's replacement decision and, thus, can yield greater CO2 reductions than a single time-of-purchase policy alone.
- Targeted incentives promoting the use of alternative fuels or advanced vehicle technology should be linked to vehicle CO2 performance.
For more information, please follow the link to the full ICCT report.
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