Incentives for CO2 emissions
reductions in motor vehicle taxes
Presentation atan ITF roundtable on Stimulating low-carbon Vehicle
Technologies
Nils Axel Braathen,OECD, Environment Directorate

1

BackgroundA paper Dr. Rana Roy, London, prepared for OECD
discusses the theoretical basis for CO2-related tax rate
differentiation in motor vehicle taxes is available atwww.oecd.org/env/taxes and.
Q This presentation describes the current use of such tax rate
differentiation, drawing on information in the OECD
database on instruments used for environmental policy:
www.oecd.org/env/policies/database.
Q (Additional) CO2-related tax rate differentiation in motorvehicle taxes in Austria
Austria, Denmark and the Netherlands is
not included in the present presentation.
Q The tax rates shown were valid as of 01.01.2009.
Q2

Types of differentiation used
One-off (purchase) taxes vs. recurrent (use) taxes;
Q CO2-differentiation vs. energy-efficiency differentiation;
Q Petrol vs. diesel (and possibly other engine categories);
Q Tax rates varying with motor vehicle prices.
Q3

One-off – tax per vehicle, petrol-driven
Petrol‐driven vehicles

60,000FrancePortugalSpain ‐‐ 10,000€
Finland ‐‐ 10,000€
Austria ‐‐ 10,000€
Ireland ‐‐ 10,000€

50,000€ per vehicle

40,000

NorwayCanadaSpain ‐‐ 25,000€
Finland ‐‐ 25,000€
Austria ‐‐ 25,000€
Ireland ‐‐ 25,000€

30,00020,00010,0000

1‐10,000

71101

131

161

191

221251281

gram CO2 emitted per km driven

311

341

371
4400

One-off – tax per vehicle, petrol-driven II
15,000€pper vehicle

10,0005,000

FranceNorwayPortugal
CanadaSpain ‐‐ 10,000€
Spain ‐‐ 25,000€
Finland ‐‐ 10,000€
Finlandl d ‐‐ 25,000€
Austria ‐‐ 10,000€
Austria ‐‐ 25,000€
Ireland ‐‐ 10,000€
Ireland ‐‐ 25,000€,Petrol‐driven vehicles

71

161?

01‐5,000101?

131

191

221

251

281

311

341

371

gram CO2 emitted per km driven
5400

One-off – tax per tonne CO2, diesel-driven
1,000€ per tonne
e CO2 emitted during the ve
ehicle's lifetime

Diesel‐driven vehicles
800

The calculations assume
that each vehicle is driven
200 000 kkm over its
it lifetime
lif ti

600

400

200

051
‐200‐40000

‐600

81111

141

171

201231

261

291

321

351

381

gram CO2 emitted per km
FrancePortugalSpaini ‐‐ 10,000€
Finland ‐‐ 10,000€
Austria ‐‐ 10,000€
Ireland ‐‐ 10,000€

NorwayCanadaSpaini ‐‐ 25,000€
Finland ‐‐ 25,000€
Austria ‐‐ 25,000€
6Ireland ‐‐ 25,000€

One-off – tax per tonne CO2, diesel-driven II400€ per tonne C
CO2 emitted dduring the ve
ehicle's lifetim
me

Diesel‐driven vehicles
300

The calculations assume
that each vehicle is driven
200 000 km over its lifetime
200

100

051

81111

141

171

201

231

261

291

321

351

381

gram CO2 emitted per km‐100100‐200France
CanadaFinland ‐‐ 10,000€
Austria ‐‐ 25,000€

NorwaySpain ‐‐ 10,000€
Finland ‐‐ 25,000€
Ireland ‐‐ 10,000€

PortugalSpain ‐‐ 25,000€
Austria ‐‐7 10,000€
Ireland ‐‐ 25,000€

Recurrent – tax per year, petrol-driven
2,500

Petrol‐driven vehicles
2,000

Denmark
Germany
Ireland€p
per year

1,500

Luxembourg
Portugal
Sweden
UK

1,000

500

0

171

101

131

161

191

221251281

gram CO2 emitted per km

311

341

371
8400

Recurrent – tax per tonne CO2, petrol-driven€ per tonnne CO2 emittted over the vehicle's lifeetime

800

Petrol‐driven vehicles

700

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

The calculations assume thateach vehicle is driven 200 000 km
over a lifetime of 15 years.

200

100

0

51

81

111

141

171
201
231
261
291
gram CO2 emitted per km

321

351

9381

Recurrent – tax per tonne CO2, discounting
800

Petrol‐driven vehicles, no discounting

700€ per tonne CO2 emitted over the vehicle'ss lifetime€ per tonne COO2 emitted over the vehicle
e's lifetime

800

Denmark
GermanyIreland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

1000

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100051

81111

141

171
201
231
261
291
gram CO2 emitted per km

321

351

381

51

81111

141

171
201
231
261
291
gram CO2 emitted per km

321

351

381

800

800

Petrol‐driven vehicles, 7% discounting

700€ per tonne
e CO2 emitted over the veh
hicle's lifetime€ per tonne
e CO2 emitted over the veh
hicle's lifetime

Petrol‐driven vehicles, 4% discounting

700

Denmark
Germany
Ireland
Luxembourg
PortugalUKSweden

600

500

400

300

200

100

Petrol‐driven vehicles, 15% discounting

700

Denmark
Germanyy
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

100051

81111

141

171
201231261
291
gram CO2 emitted per km

321

351

381

51

81111

141

171
201
231
261
291
gram CO2 emitted per km

321351381€ per ton
nne CO2 emitted
d‐100France

280 gram CO2 per km

700

500

300

100‐100
One‐off‐100

Recurrent
11

Sweden ‐‐ Diesel

Sweden ‐‐ Petrol

Portugal ‐‐‐ Diesel

Portugal ‐‐‐ Petrol

NorwayN

Luxembourg ‐‐‐ Diesel

Luxembourg ‐‐‐ Petrol

IrelandGeermany

FinlandFranceDenmark ‐‐‐ Diesel

UK ‐‐ Diesel

100UK ‐‐ Diesel

300

UK ‐‐ Petrol500

UK ‐‐ Petrol

700

Spain

380 gram CO2 per km

Spain

Swedden ‐‐ Diesel

Swed
den ‐‐ Petrol

Portuugal ‐‐ Dieselugal ‐‐ Petrol
Portu

NorwayLuxembourg ‐‐ Dieselurg ‐‐ Petrol
Luxembou

IrelandGermany

Finland900

FranceDenmark ‐‐‐ Petrol

900

Denm ark ‐‐ Diesel

Denmaark ‐‐ Petrol

Canada ‐‐‐ Diesel

Canada ‐‐‐ Petrol

Austria ‐‐ Diesel

Austria ‐‐ Petrol‐100Canaada ‐‐ Diesel

100Canaada ‐‐ Petrol

300

Austtria ‐‐ Diesel

500€ per tonne CO
O2 emitted

UK ‐‐ Diesel

UK ‐‐ Petrol

Spain

Sweden ‐‐ Diesel

Sweden ‐‐ Petrol

Portugal ‐‐‐ Diesel

Portugal ‐‐‐ Petrol

NorwayN

Luxembourg ‐‐‐ Diesel

Luxembourg ‐‐‐ Petrol

Ireland

Geermany

700

Austtria ‐‐ Petrol

FranceFinland

120 gram CO2 per km€ per tonne
e CO2 emitteddUK ‐‐ Diesel

UK ‐‐ Petrol

Spain

Swed
den ‐‐ Diesel

Swedden ‐‐ PetrolPortu
ugal ‐‐ Diesel

ugal ‐‐ Petrol
Portu

NorwayLuxembourg ‐‐ Diesel

urg ‐‐ Petrol
Luxembou

IrelandGermany

Finland900
Denmark ‐‐‐ Diesel

Denmark ‐‐‐ PetrolCanada ‐‐‐ Diesel

Canada ‐‐‐ Petrol

Austria ‐‐ Diesel

900

Denm ark ‐‐ Diesel

Denmaark ‐‐ Petrol

Canaada ‐‐ Diesel

Canaada ‐‐ Petrol

Austtria ‐‐ Diesel

Austria ‐‐ Petrol‐100

Austtria ‐‐ Petrol€ per tonne CO2 emitted

Total taxes – per tonne CO2
180 gram CO2 per km

700

500
300

100

Conclusions
QThe tax rates applied per tonne CO2 emitted over a vehicle’s lifetime
varies significantly between countries – with Norway,
Norway Portugal,
Portugal Irelandand Denmark having very high tax rates for high-emission vehicles.

QIt is difficult to see strong reasons why the tax rate per tonne lifetime CO2emissions
i ishould
h ld iincrease with
ith iincreasingi emissions
i iper kkm ddriven.
iQ

Given the much lower marginal abatement costs for other CO2 emission
mitigation options, one can also question why so strong incentives areprovided to abate CO2 emissions from some motor vehicles.

Q

Difficult to understand why a tonne CO2 emitted over a vehicle’s lifetime
should be higher for diesel
diesel-driven
driven than for petrol
petrol-driven
driven vehicles.

Q

Also, from an environmental point of view, the arguments for applying ahigher tax rate per tonne CO2 emitted from an expensive vehicle thanfrom a cheaper one seem weak.
weak12