Greening the Dutch car fleet: the role of differentiated sales taxes

21-01-2014 | Publication

In the Netherlands, car taxes since 2006 have become increasingly dependent on a vehicle's CO2 emission level. This ultimately resulted in the introduction of a progressive tax system, related to this emission level, for the vehicle sales tax (VST) in 2010. This study shows that the new VST system has proved to be an effective way of pushing new car sales towards more small, fuel-efficient passenger vehicles.

The reform of the VST system has stimulated the sale of fuel-efficient cars

Using an econometric model, we analysed to what extent changes in purchase price and operating costs could explain changes in vehicle choice behaviour. We used survey information on car ownership among Dutch households. Model simulations show the progressive tax system for the VST to be an effective way of stimulating the purchase of small, fuel-efficient cars and to discourage that of large and inefficient cars.

To achieve the same effect by increasing fuel prices, substantial price increases would be needed, differentiated according to fuel type. Stimulating the purchase of small, fuel-efficient cars would be achieved most effectively by lowering their sales tax. However, greening the Dutch car fleet is not only a matter of composition but also of size. These differences were not explored in this study.

PBL Working paper 18