Modelling the impacts of a carbon emission-differentiated vehicle tax system on CO 2 emissions intensity from new vehicle purchases in Ireland

Abstract

The increasing awareness of the effects of climate change on the environment and the economic pressure on oil supply has focused international attention on reducing CO 2 emissions and energy usage across all sectors. In order to meet their Kyoto protocol commitments and in line with European Union policy, the Irish government has introduced a carbon-based tax system for new vehicles purchased from the 1st of July 2008. This new legislation aims to reduce carbon emissions in the transport sector, a sector which is responsible for a significant proportion of both. This paper presents the results of the development, calibration, and application of a car choice model which predicts the changes in CO 2 emissions intensity from new vehicle purchases as a result of the changes in vehicle tax policy and fuel price in Ireland. The model also predicts the impact of such changes on tax revenue for the Irish government and the changes in the split between the number of diesel and petrol vehicles purchased. The investigation found that the introduction of these new carbon-based taxes in Ireland will result in a reduction of 3.6–3.8% in CO 2 emissions intensity and a reduction in annual tax revenue of €191 M.