Unclassified

ENV/EPOC/WPNEP/T(2009)2/FINAL

Organisation de Coopération et de Développement Économiques
Organisation for Economic Co-operation and Development

03-Sep-2009___________________________________________________________________________________________English - Or. English

ENVIRONMENT DIRECTORATEENVIRONMENT POLICY COMMITTEE

ENV/EPOC/WPNEP/T(2009)2/FINAL
Unclassified

Working Party on National Environmental Policies
Working Group on Transport

INCENTIVES FOR CO2 EMISSION REDUCTIONS IN CURRENT MOTOR VEHICLE TAXESThis paper compares CO2-related tax rate differentiation in motor vehicle taxes in OECD member countries –drawing on information available in the OECD/EEA database on instruments used for environmental policy,
www.oecd.org/env/policies/database.
The paper should be read in conjunction with the paper "The scope for CO2-based differentiation in motor
vehicle taxes – in equilibrium and in the context of the current global recession", available atwww.oecd.org/env/transport.

For further information, please contact Nils Axel Braathen, Tel: +33 (0) 1 45 24 76 97;
Email: Nils-Axel.Braathen@oecd.org.
English - Or. English

JT03269005
Document complet disponible sur OLIS dans son format d'origine
Complete document available on OLIS in its original format

ENV/EPOC/WPNEP/T(2009)2/FINAL

FOREWORD

This paper, prepared by Nils Axel Braathen of the OECD Secretariat, compares CO2-related tax rate
differentiation in motor vehicle taxes in OECD member countries – drawing on information available intheOECD/EEA
databaseon
instruments
usedforenvironmental
policy,www.oecd.org/env/policies/database.
The paper should be read in conjunction with the paper The scope for CO2-based differentiation in
motor vehicle taxes – in equilibrium and in the context of the current global recession, available atwww.oecd.org/env/transport.

2

ENV/EPOC/WPNEP/T(2009)2/FINALTABLE OF CONTENTSFOREWORD .................................................................................................................................................. 2
INCENTIVES FOR CO2 EMISSIONS REDUCTIONS IN MOTOR VEHICLE TAXES............................ 5
1.
2.
3.
4.
5.

Introduction .......................................................................................................................................... 5
Overview of current CO2-related tax differentiation in motor vehicle taxes ....................................... 5
Differentiation in one-off taxes on motor vehicle purchases ............................................................... 6
Differentiation in recurrent taxes on motor vehicles.......................................................................... 11
Discussion and conclusions ............................................................................................................... 16

TablesTable 1.

CO2- or fuel efficiency based tax rate differentiation in motor vehicle taxes ......................... 6

FiguresFigure 1.
Figure 2.
Figure 3.
Figure 4.
Figure 5.
Figure 6.
Figure 7.
Figure 8.

One-off taxes -- Tax per vehicle ............................................................................................. 7
One-off vehicle taxes -- Tax per petrol-driven vehicle ........................................................... 8
One-off vehicle taxes -- Tax per tonne lifetime CO2 emissions ........................................... 10
One-off vehicle taxes -- Tax per tonne lifetime CO2 emissions ........................................... 11
Recurrent motor vehicle taxes -- Tax per year ...................................................................... 12
Recurrent motor vehicle taxes -- Tax per tonne lifetime CO2 emissions .............................. 13
Recurrent motor vehicle taxes -- Tax per tonne lifetime CO2 emissions -- Discounting...... 14
Recurrent and one-off motor vehicle taxes -- Tax per tonne CO2 emitted over lifetime ...... 15

3

ENV/EPOC/WPNEP/T(2009)2/FINAL

4

ENV/EPOC/WPNEP/T(2009)2/FINALINCENTIVES FOR CO2 EMISSIONS REDUCTIONS IN MOTOR VEHICLE TAXES

1.

Introduction

1.
A number of OECD member countries are now applying some form of CO2-related tax rate
differentiation in their taxes on either the purchase or the use of motor vehicles. There are also a number ofcountries where the tax rates in motor vehicle taxes depend on the fuel efficiency of the vehicles inquestion – which is closely linked to the CO2 emissions caused.
2.
The present paper compares the use of CO2- or energy efficiency tax rate differentiation in OECD
countries at present. It should be read in conjunction with the paper The scope for co2-based differentiationin motor vehicle taxes – in equilibrium and in the context of the current global recession, that discusses ona more theoretical basis “the role” of CO2-related tax rate differentiation in motor vehicle taxes.
2.

Overview of current CO2-related tax differentiation in motor vehicle taxes

3.
Table 1 provides an overview of the use of CO2- or fuel efficiency based tax rate differentiationin motor vehicle taxes in member countries, based on information available in the OECD/EEA database on
instruments used for environmental policy, cf. www.oecd.org/env/policies/database.
4.
In all, information is available regarding 16 such taxes in 14 member countries.1 In three of thesetaxes, the tax rates depend on the fuel efficiency of the vehicles,2 while in the 13 other cases, the tax rates
vary with the CO2 emissions per km driven. 9 of the taxes are levied one-off, at the time of the purchase or
first registration of the vehicle, while the 7 others are recurrent, annual, taxes that the owners of thevehicles have to pay in order to be allowed to use their vehicles.

1

In addition, several Swiss cantons have introduced, or are planning to introduce, differentiation in recurrent
motor vehicle taxes, with tax reductions for low-emission vehicles. See for example
http://etat.geneve.ch/dt/voiturepluspropre/accueil.html.

2

Given that the carbon contents of the fuels cannot be “cleaned” in any practical way, there is a direct
relationship between fuel efficiency and CO2 emissions.

5ENV/EPOC/WPNEP/T(2009)2/FINAL
Table 1. CO2- or fuel efficiency based tax rate differentiation in motor vehicle taxes
Country

Name of tax

One-off orrecurrent

CO2 or fuelefficiency

Austria

Vehicle registration tax

One-off

Fuel eff.

CanadaGreen Levy

One-off

Fuel eff.

Denmark

Passenger car fuel consumption tax

Recurrent

Fuel eff.

FinlandOne-off

CO2

FranceCar tax – passenger cars
Tax on vehicle registration for highCO2 emitters

One-off

CO2

Germany

Motor Vehicle Tax

Recurrent

CO2

Ireland

Vehicle Registration Tax

One-off

CO2

IrelandMotor Vehicle Tax

Recurrent

CO2

Luxembourg

Motor Vehicle Tax

Recurrent

CO2

Netherlands

Car registration tax

One-off

CO2

NorwayMotor vehicle registration tax

One-off

CO2

Portugal

Excise tax on motor vehicles

One-off

CO2

Portugal

Motor vehicle circulation tax

Recurrent

CO2

Spain

Tax on vehicle registration

One-off

CO2

SwedenUnitedKingdom

Motor Vehicle Tax

Recurrent

CO2

Vehicle excise duty

Recurrent

CO2

Comments
Flat rate for diesel (petrol)vehicles using more than 10 (11)litres per 100 km.
Gradually increasing taxes forvehicles with low fuel efficiency.
Until 31.12.08: Also bonuses forvehicles with high fuel efficiency.
Different, progressive, rates for
petrol- and diesel-driven cars
Tax as % of retail value:(0.1 * gram CO2 per km)+4
Bonus – malus system2€ per gram CO2 per km, above
120 gram per km (until 2011).
Same, progressive rates for all car
categories
Same, progressive rates for all car
categories
Different, progressive, rates for
petrol- and diesel-driven cars
Information is lacking in our
database.
Same, progressive rates for all car
categories
Different, progressive, rates for
petrol-, diesel-, LPG- and hybriddriven cars
Same, progressive rates for all car
categories
Same, progressive rates for all car
categories
Different, fixed rates for petroland diesel-driven cars
Different, progressive, rates for
petrol- and diesel-driven cars

Source: www.oecd.org/env/policies/database.

3.

Differentiation in one-off taxes on motor vehicle purchases

5.
Differentiating motor vehicle purchase taxes according to the fuel-efficiency or the CO2
emissions of the vehicle can give potential (and possibly ‘myopic’) vehicle purchasers an immediate
incentive to buy a vehicle that causes relatively few CO2 emissions when being used.
6.
Figure 1 compares the tax rates (or bonuses) per vehicle applied in some countries, differentiatedaccording to the number of gram CO2 the vehicle (on average) emits per km it is driven.3 Austria4, Canada
3

In addition to the CO2-related element, the Motor vehicle tax in Norway also contains a cylinder volume
part and a kW-based part – that apply to the same vehicles. The total tax that a car purchaser would have to
pay is thus significantly higher than what is described in this comparison – a comparison that only focuseson the carbon element embedded in the tax.

4

In order to compare the energy efficiency-based taxes in Austria and Canada with the CO2-based taxes inother countries, it has been assumed that combustion of one litre of petrol leads to 2.3434 kg CO2
emissions, while the corresponding figure for a litre of diesel is 2.682 kg CO2 emissions.

6ENV/EPOC/WPNEP/T(2009)2/FINALand Portugal apply different tax rates for petrol- and for diesel-driven cars, and in order to simplify thepresentation, tax rates for petrol-driven vehicles are shown in the upper panel, and tax rates for dieseldriven vehicles in the lower panel. In Austria, Ireland, Finland and Spain, the tax per vehicle also depends
on the price of the vehicle. For illustration purposes, Figure 1 shows tax rates for vehicles with net-of-tax
prices of either 10,000€ or 25,000€.
Figure 1. One-off taxes -- Tax per vehicle
Petrol- or diesel-driven vehicles, tax rates as of 01.01.2009

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€

30,00020,00010,000

0

1

101

131

161

191

221

251

281

-10,000

gram CO2 emitted per km driven

60,000

Diesel-driven vehicles
FrancePortugalSpain -- 10,000€
Finland -- 10,000€
Austria -- 10,000€
Ireland -- 10,000€

50,00040,000€ per vehicle

71

311

341

371

400

311

341

371

400

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

30,00020,00010,0000

1-10,000

71

101

131

161

191

221

251

281

gram CO2 emitted per km driven

7ENV/EPOC/WPNEP/T(2009)2/FINAL7.
As e.g. can be seen in the case of Portugal, where there are differences in tax rates depending on
the fuels used, tax-rates for diesel-driven vehicles are higher than the tax rates applicable for petrol-driven
vehicles.
8.
In order to highlight the differences between countries, Figure 2 zooms in on taxes and bonusesin the range -5,000 to 16,000€, for the case of petrol-driven vehicles. One can see that Canada, France andNorway give bonuses (subsidies) for the purchase of vehicles with relatively modest CO2 emissions per km
driven. In Canada, neither bonuses nor taxes apply for petrol-driven vehicles with emissions between 160
and 310 gram per km, while increasing tax rates are levied on vehicles with (even) higher emissions per
km. In France, the bonuses gradually decrease, and increasing taxes are levied for vehicles with emissions
larger than 160 gram CO2 per km. In the Norwegian case, rapidly increasing taxes apply for petrol-driven
vehicles with CO2 emissions per km exceeding 120 gram per km.
9.
While no bonuses apply for low-emission vehicles, rapidly increasing taxes also apply to vehicles
with emissions higher than 120 gram per km in Portugal.5 In Ireland, relatively significant taxes are leviedalso on the vehicles with the lowest CO2 emissions, with increasing tax rates applying in the range 120 to
225 gram CO2 emitted per km driven. In Finland, the tax rates increase monotonically almost from zeroCO2 emissions per km, with tax rates for expensive vehicles being higher than the tax rates for cheapervehicles. The tax rates increase with vehicle prices also in Austria, Ireland and Spain – but at lower levels
than in Finland.
Figure 2. One-off vehicle taxes -- Tax per petrol-driven vehicle
Tax rates as of 01.01.09

15,000€ per vehicle

10,0005,000

FranceNorwayPortugal
CanadaSpain -- 10,000€
Spain -- 25,000€
Finland -- 10,000€
Finland -- 25,000€
Austria -- 10,000€
Austria -- 25,000€
Ireland -- 10,000€
Ireland -- 25,000€

Petrol-driven vehicles

71

161

0

1

101

131

191

221

251

281

311

341

371

400

gram CO2 emitted per km driven-5,0005

In both Norway and Portugal, the tax rates per vehicle rapidly exceed the upper “limit” of 16,000€ used in
Figure 2.

8

ENV/EPOC/WPNEP/T(2009)2/FINAL
10.
By making assumptions regarding how far a vehicle is driven over its lifetime, one can also
calculate tax rates expressed per tonne CO2 each vehicle will emit over its lifetime. This is done in Figure
3, for petrol- and diesel-driven vehicles respectively – assuming for simplicity that all vehicles are driven
200,000 km over their lifetime.6
11.
One can notice that while the tax per tonne of lifetime CO2 emissions is relatively similar forvehicles that emit up to 170 gram CO2 per km they are driven, vehicles that have higher emissions per km
are strongly “penalised” in Norway and Portugal. One could argue that each tonne of lifetime CO2
emissions causes the same environmental damage – and thus ought to be taxed equally – but to the extent
that vehicles with large emissions per km are driven more over their lifetime than vehicles with lower
emissions per km (thus invalidating the assumption that all vehicles are driven 200,000 km), some“penalisation” could be called for. Nevertheless, it is difficult to see arguments from an economic
efficiency point of view for such a strong “penalisation” of high-emission vehicles as these two countries
apply.
12.
One can also notice that the tax per tonne of lifetime CO2 emissions in (especially) Portugal issignificantly higher for diesel-driven vehicles than for petrol-driven vehicles. While such a “preference
order” makes good sense from a local air pollution perspective, it is difficult to see environmental or
economic arguments for taxing equal lifetime CO2 emissions differently, depending on the fuel type being
used.
13.
Figure 4 zooms in on bonuses and tax rates per lifetime CO2 emissions in the range -200€ to400€, in order to better show differences between (most) countries – in this case, for diesel-driven vehicles.
One can distinguish between three groups of countries. Norway and Portugal are clear “outliers”, with very
high tax rates per tonne lifetime CO2 emissions for vehicles with high CO2 emissions per km driven. In
Finland and Ireland, the tax rates for diesel-driven vehicles with net-of-tax prices like 25,000€ (about 100150 €) are clearly exceeding the tax rates per tonne lifetime CO2 emissions found in the remaining cases(where the rates in most cases vary between 20€ and 80€ for high-emission vehicles).7

6

It is probably not realistic to assume that all vehicles are driven the same number of km over their lifetime– for example, small vehicles tend to be driven less than larger ones, and diesel-driven vehicles tend to be
driven longer than petrol-driven vehicles. For vehicles actually driven more than 200,000 km over their
lifetime, the real tax rate per tonne lifetime CO2 emissions will be lower than shown in Figure 3.

7

A higher net-of-tax price than 25,000€ would yield even higher taxes than those depicted here.

9ENV/EPOC/WPNEP/T(2009)2/FINAL
Figure 3. One-off vehicle taxes -- Tax per tonne lifetime CO2 emissions
Petrol-and diesel-driven vehicles.

1,000€ per tonne CO2 emitted during the vehicle's lifetime

Petrol-driven vehicles
800

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

600

400

200

0

51

81

111

141

-200

171
201
231
261
291
gram CO2 emitted per km

321

FrancePortugalSpain -- 10,000€
Finland -- 10,000€
Austria -- 10,000€
Ireland -- 10,000€

-400

-600
1,000

351

381

NorwayCanadaSpain -- 25,000€
Finland -- 25,000€
Austria -- 25,000€
Ireland -- 25,000€€ per tonne CO2 emitted during the vehicle's lifetime

Diesel-driven vehicles
800

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

600

400

200

0

51
-200

81

111

141

171

201

231

261

291

321

351

381

gram CO2 emitted per km
FrancePortugalSpain -- 10,000€
Finland -- 10,000€
Austria -- 10,000€
Ireland -- 10,000€

-400

-600

10

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

ENV/EPOC/WPNEP/T(2009)2/FINAL
Figure 4. One-off vehicle taxes -- Tax per tonne lifetime CO2 emissions
Diesel-driven vehicles

400€ per tonne CO2 emitted during the vehicle's lifetime

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

300

200

100

0

51

81

111

141

171
201
231
261
291
gram CO2 emitted per km
FrancePortugalSpain -- 10,000€
Finland -- 10,000€
Austria -- 10,000€
Ireland -- 10,000€

-100

-200

4.

321

351

381

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

Differentiation in recurrent taxes on motor vehicles

14.
Differentiation of recurrent (annual) taxes on motor vehicle use in relation to the CO2 emissionsof the vehicles will also provide (potential) car owners with an incentive to choose a vehicle causing lower
emissions than otherwise – but somewhat less directly so at the time of vehicle purchase than differentiatedone-off purchase taxes. On the other hand, a recurrent tax also give owners of used cars an incentive toswitch to vehicles with lower emissions, while this is not the case with one-off taxes.8
15.
Figure 5 illustrates the use of CO2-related tax rate differentiation in recurrent motor vehicle taxes
in the 7 OECD countries that apply such differentiation. One can see that these taxes are generally very
modest for vehicles with CO2 emissions below 100 (diesel) to 120 (petrol) gram per km driven. Beyond
these emission levels, the taxes due per year increase significantly – and more so for diesel-driven than for
petrol-driven vehicles in Denmark, Luxembourg and Sweden.

8

Both types of taxes could also have impacts on net-of-tax prices for new and used vehicles, with higher
taxes causing some downward pressure on net-of-tax prices.

11

ENV/EPOC/WPNEP/T(2009)2/FINAL
Figure 5. Recurrent motor vehicle taxes -- Tax per year
Petrol- and diesel-driven vehicles, tax rates as of 01.01.09
2,500

Petrol-driven vehicles
2,000

Denmark
Germany
Ireland€ per year

1,500

Luxembourg
Portugal
Sweden
UK

1,000

500

0

1

71

101

131

161

191

221

251

281

311

341

371

400

311

341

371

400

gram CO2 emitted per km
2,500

Diesel-driven vehicles
2,000

Denmark
Germany
Ireland€ per year

1,500

Luxembourg
Portugal
Sweden
UK

1,000

500

0

1

71

101

131

161

191

221

251

281

gram CO2 emitted per km
Note: In the case of Germany, the CO2-related tax rate differentiation came into effect from 01.07.09.

12

ENV/EPOC/WPNEP/T(2009)2/FINAL
16.
By assuming that each vehicle is driven 200,000 km over its lifespan, and by also assuming thatthe lifespan of each vehicle is 15 years, one can also calculate tax rates per tonne CO2 emitted by thevehicle over its lifetime. Figure 6 provides an illustration, with separate panels for petrol-and diesel-driven
vehicles.
Figure 6. Recurrent motor vehicle taxes -- Tax per tonne lifetime CO2 emissions
Petrol- and diesel-driven vehicles, tax rates as of 01.01.09€ per tonne CO2 emitted over the vehicle's lifetime

800

Petrol-driven vehicles
700

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

Denmark

600

Germany
Ireland500

Luxembourg
Portugal

400

UK
Sweden

300

200

100

0

51

81

111

141

171
201
231
261
291
gram CO2 emitted per km

321

351

381

€ per tonne CO2 emitted over the vehicle's lifetime

800

Diesel-driven vehicles
700

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

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

0

51

81

111

141

171

201

231

261

291

gram CO2 emitted per km

13

321

351

381

ENV/EPOC/WPNEP/T(2009)2/FINAL17.
One can make several observations based on these graphs. One is that a flat tax rate per year forvehicles with CO2 emissions over a certain limit, as applied in Ireland, UK and Portugal, (obviously)translates into a tax rate per tonne lifetime CO2 emissions that decreases with increasing CO2 emissions per
km driven. Hence, in all three countries, the tax rates per tonne CO2 emitted over the lifetime of a vehicle
emitting 400 gram CO2 per km is lower than the rate for a vehicle emitting 220 gram per km.
18.
By comparing Figure 6 to Figure 3, one can also see that (with the exceptions of the very highone-off taxes on high-emission vehicles in Norway and Portugal) the tax rates per tonne lifetime CO2
emissions tend to be higher in recurrent taxes than in one-off taxes.
19.
However, no discounting of future tax payments has been made in Figure 6. In Figure 7, theimpacts of four different discount rates on the present value of the tax payments over 15 years areillustrated, for the case of petrol-driven vehicles.
Figure 7. Recurrent motor vehicle taxes -- Tax per tonne lifetime CO2 emissions -- Discounting
Petrol-driven vehicles, 0%, 4%, 7% and 15% discounting
800

Petrol-driven vehicles, no discounting

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

800

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

0

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

0

51

81

111

141

171 201 231 261 291
gram CO 2 emitted per km

321

351

381

51

81

111

141

171 201 231 261 291
gram CO2 emitted per km

321

351

381

800

800

Petrol-driven vehicles, 7% discounting

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

Petrol-driven vehicles, 4% discounting

700

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

Petrol-driven vehicles, 15% discounting

700

Denmark
Germany
Ireland
Luxembourg
Portugal
UK
Sweden

600

500

400

300

200

100

0

0

51

81

111

141

171 201 231 261 291
gram CO2 emitted per km

321

351

51

381

81

111

141

171 201 231 261 291
gram CO2 emitted per km

321

351

381

20.
Clearly, applying a positive discount rate reduces the present value of recurrent motor vehicle tax
payments. And while a 15% (real) discount rate would be considered very high in terms of e.g. a social
cost-benefit analysis, it is not unconceivable that households actually apply such a high rate of discounting
when considering choices between different motor vehicle models. If that is the case, the differences
between the bulk of the one-off lifetime CO2 tax rates of Figure 3 and the recurrent lifetime CO2 tax ratesof Figure 7 are relatively small.
21.
To facilitate comparisons, Figure 8 illustrates tax rates per tonne CO2 emitted over a vehicles’
lifetime in one-off and recurrent motor vehicle taxes at selected CO2 emission levels, for both petrol- and14

ENV/EPOC/WPNEP/T(2009)2/FINAL
diesel-driven vehicles. No discounting is used here regarding the recurrent taxes. Where tax rates in oneoff taxes vary with vehicle price, a net-of-tax price of 10,000€ has been used.
Figure 8. Recurrent and one-off motor vehicle taxes -- Tax per tonne CO2 emitted over lifetime
Petrol-and diesel-driven vehicles, selected emission levels

15ENV/EPOC/WPNEP/T(2009)2/FINAL
5.

Discussion and conclusions

22.
The present comparison illustrates that some sort of CO2-related tax rate differentiation is now
included in the motor vehicle taxes in a number of OECD countries, in particular in Europe. Such tax rate
differentiation is applied in either one-off taxes on motor vehicle purchases or in recurrent taxes on vehicle
ownership or use – and two countries (Ireland and Portugal) have such rate differentiation in bothcategories of taxes.
23.
The comparisons made above make it clear that the tax rates applied per tonne CO2 emitted overa vehicle’s lifetime varies significantly between countries – with Norway, Portugal, Ireland and Denmark
having particularly high tax rates for high-emission vehicles.9 While there are good reasons to increase thetax rates per vehicle (in the case of one-of taxes) or per year (in the case of recurrent taxes) with increasing
CO2 emissions per vehicle driven, it is more difficult to see strong reasons why the tax rate per tonne
lifetime CO2 emissions should increase with increasing emissions per km driven.10 Given the much lower
marginal abatement costs for other CO2 emission mitigation options in the respective countries (e.g. as
regards industry – cf. the CO2 emission permit prices in the EU’s Emission Trading System, that have been
below 15€ per tonne CO2 in recent months), one can question why so strong incentives are provided inthese countries to abate CO2 emissions from some motor vehicles.11
24.
One can also notice that several countries apply different tax rates per tonne CO2 emitted over the
lifetime of petrol- and diesel-driven vehicles, with the higher rates being applied for the latter category.
From a local air pollution perspective, it makes good sense to tax diesel-driven vehicles more heavily thanpetrol-driven ones. However, a given tonne of CO2 does the same harm regardless of the fuel-type it isstemming from. Hence, one can again question the rationale for some of the current practices.
25.
The price of a vehicle is not a good indicator of the environmental harm it causes. Hence, from anenvironmental point of view, the arguments for applying a higher tax rate per tonne CO2 emitted from an
expensive vehicle than from a cheaper one seem weak. It is probably equity concerns that explain the useof such tax rate differentiation in several countries.

9

The highest total tax rate per tonne CO2 emitted over the vehicle’s lifetime (776.5€) relates to vehicles
emitting 226 gram CO2 per km driven in Ireland.

10

One possibility could in principle be that vehicles with high emissions per km driven tend to be driven
longer distances over their lifetime than vehicles causing lower emissions per km. The Secretariat does nothave data to confirm or reject this possibility – but the differences in km driven would have to be verylarge in order to “compensate” for some of the differences described in this note.

11

In addition, one should keep in mind that there are also separate CO2 elements in the motor fuel taxes inseveral of these countries.
The taxes per tonne lifetime CO2 emissions in some of these countries are also rather high compared e.g. to
the development over time of the price that emitters would need to be charged for each tonne of GHG
emissions to induce them to reduce emissions enough to keep global emission trends on track with ascenario that OECD recently elaborated, that stabilises the CO2 concentration in the atmosphere at 450ppm,
cf. www.oecd.org/dataoecd/31/55/41751042.pdf.

16