Seminar

Why truck distance charges are contagious and drive fuel taxes to the bottom

Stef Proost (KULeuven and KTH-Stocholm)

October 20, 2014, 11:00–12:30

Toulouse

Room MS 003

Environment Economics Seminar

Abstract

This paper analyzes how countries with international and local truck traffic decide to switch from a fuel tax system only to a dual system of fuel taxes and kilometer charging. We show what drives one country to switch and how this affects the level of fuel taxes and the incentives for the other countries to also opt for the dual system. The model is able to partially explain the gradual extension of the kilometer charging in Europe. The model also shows how, in the absence of diesel cars, the gradual introduction of kilometer charges will make fuel taxation for trucks virtually disappear and lead to a system where truck use is mainly taxed by distance charges only but is taxed too heavily. When the fuel tax also has to serve as externality tax on diesel cars, the introduction of distance charges for trucks will give rise to diesel taxes that will be lower than the external cost of diesel cars. In the case of trucks this leads to a sum of diesel taxes and distance charges that will be higher than the external cost of trucks.