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.
Alberto Gago, Xavier Labandeira and Xiral López-Otero
David Robinson, Pedro Linares Llamas, Xiral López-Otero and Renato Rodrigues
In this chapter, we argue that fiscal policy in Europe is not aligned with decarbonization and propose reforms to improve the alignment. We also report on a case study carried out to model the impact of implementing a version of the proposed fiscal reforms in Spain. The case study illustrates that the fiscal reforms are valuable, particularly in reducing carbon dioxide emissions. However, it also reveals the need for a transition plan to send effective investment signals and address the political economy frictions created when new technologies are being introduced, especially in the transport sector.