Abstract
An analysis is provided to what degree the current taxation of the purchase and ownership of cars can be replaced by a system of kilometre-based road pricing, which charges for using the car. Such a change might enhance social welfare when the external cost of the use of cars is currently inadequately priced. It is concluded that congestion pricing based on time and place is socially desirable, with local cordon fees being a feasible alternative. Further, a flat levy of about 3 cents per kilometre can be justified alongside congestion pricing in order to internalize external costs other than congestion and greenhouse gases. Current fuel duties approximate such a flat levy. Finally, it seems neither feasible nor efficient to shift the entire tax burden from purchase and ownership to use. An efficient policy mix, therefore, also includes taxes on purchase and/or ownership.
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