A review and comparative analysis of fiscal policies associated with new passenger vehicle CO2 emissions
Governments worldwide are increasingly looking to fiscal policy to enhance and reinforce standards-based approaches to reducing vehicle emissions. The taxes, fees, rebates, and other instruments in use or proposed vary significantly in what they measure, their stringency, timing, and other details. That makes comparison across jurisdictions challenging, though it is essential to evaluating the relative benefits of different approaches and isolating best practices. This report analyzes three types of taxes and incentives applied to new private passenger vehicles in eight of the world’s leading auto markets: those that vary directly with vehicle CO2 emissions or fuel economy; those that vary with a vehicle attribute related to CO2 emissions, such as engine size or vehicle weight; those designed to promote alternative fuels or vehicles (e.g., ethanol, hybrids). It develops a quantitative comparison of the strength of the price signal created by each charge or incentive. To compare the price signal across such a varied set of fiscal instruments, the authors calculate equivalent marginal CO2 rates as measured by U.S. dollar assigned to each marginal gram of CO2 emitted from one kilometer of driving.