Road transport has traditionally been subject to a number of taxes, the purposes being to collect revenue, cover infrastructure costs and correct externalities. However, in recent years several factors have been undermining the operation and effectiveness of such taxes: pervasive local pollution and congestion problems that are only indirectly related to vehicle type and fuel consumption; the trend towards a more energy-efficient fleet, reducing the revenue capabilities of the system; and increased changes in mobility options. In this chapter we suggest a new approach towards transport taxation that is based on both the characteristics of the vehicle and its actual use. Taxing the real use of a vehicle is now technologically feasible and can more effectively tackle the externalities associated with road transport, while maintaining revenue-raising capabilities. Given the difficulties associated with an immediate transition, the chapter also considers several alternatives for moving from the current tax situation.