Taxation futures for sustainable mobility

Dr Stephen Potter
Dr Graham Parkhurst

The Open University
University of the West of England


In the UK, there have been substantial practical and political difficulties in using economic instruments to encourage more sustainable forms of transport. Policy seems to have shifted away from attempting behavioural changed to tax concessions on cleaner vehicles and funding public transport schemes. Yet research shows the impossibility of sustainable mobility without efficient price signals. This project integrates a number of research activities to explore key factors in a successful restructuring the car taxes and charges regime, including:

  1. Modelling the tax concessions to establish low carbon cars in the UK;
  2. Estimating the decline in UK government revenues from motoring taxation if energy efficient cars and alternative fuels become widespread;
  3. Using s Dutch model of traffic and emissions reduction from a fiscally-neutral replacement of existing motoring taxes by a distance charging system;
  4. Empirical studies of the environmental effects of distance charging used in European Car Clubs Scenarios will be developed to provide estimates of the transport and environmental effects of different tax scenarios and other key effects. Seminars and workshops with users will help this project set an agenda for further research and policy actions.

Background and Rationale
Personal mobility is a particularly difficult environmental policy area. Economic instruments are widely advocated to address environmental impacts, but changes to transport taxation to affect human behaviour have seemingly disappointing results and generate powerful political opposition. This was demonstrated by the fuel duty protests of September 2000. Subsequently government reduced road fuel and vehicle taxation and has moved towards tax concessions to low carbon vehicle technologies. Yet research continues to emphasise the impossibility of achieving anything approaching sustainable mobility without the use of efficient price signals.

Added to the political failure of economic instruments to influence car use, there is a second consequence. With price signals used to favour low carbon vehicles, tax revenues from cars and fuels have started to drop, and could dramatically decline.

Overall there is a growing and seemingly intractable problem of personal mobility and the environment. Because car ownership is such a central feature of our lives it is viewed as political suicide for any government to raise vehicle or fuel taxation to a level that will produce significant behavioural change. Added to this the level of tax concessions needed for the adoption of cleaner car technologies (which alone will not deliver sustainable mobility) will result in a large drop in tax revenues.

Key Research Question
Trying to change the pricing signals within the existing transport tax and charging regime that was not designed to influence behaviour appears to have failed. This has not been entirely accepted, but UK and international experience of the last decade is increasingly moving towards this unfortunate conclusion. Therefore, instead of modifying existing tax measures, could a different car taxation structure be more amenable to policies providing behavioural change signals, maintain government income, and be politically acceptable?

Research Approach
This project will essentially synthesise existing research by a number of people who have explored different ways in which the taxation and charging regime could be structurally altered to be more amenable to the effects of pricing signals. The project will synthesise the two key drivers for addressing the transport taxation system, which are:

a) The potential of alternative car taxation regimes to deliver effective pricing signals reflecting environmental costs; and simultaneously

b) Its introduction in a fiscally-neutral way that maintains taxation income from car purchase ownership and use.

A series of scenarios will be developed which will be assessed for their tax income and ability to deliver effective environmental signals to car users. A version of the Dutch Scenario Verkenner (Scenario Explorer) will be used to provide a detailed estimate of the transport and environmental effects of the different tax scenarios. The project will commence with one or more seminars for user groups and following this an advisory group will be appointed to comment upon the integration of the team's existing research into the scenario development. The project would conclude with a series of seminars to users and the production of a report.

Intended outcomes

  • To synthesise existing research by a number of people who have explored different ways in which the taxation and charging regime could be structurally altered to be more amenable to the effects of pricing signals;
  • To provide a framework in which alternative transport taxation and charging regimes can be explored;
  • To identify what conditions, supporting measures and technologies would be needed for the alternative regimes;
  • To identify an agenda for future research on the issue of appropriate taxation regimes for use with sustainable transport technologies and behaviour patterns;
  • To undertake this research in a way that actively involves policymakers and implementation agencies.
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Dr Stephen Potter
Dr Stephen Potter has for over 20 years conducted research on the relationship between transport policy, taxation and the environment. This has included work in the 1980s on company car taxation and participating in a major CEC project for DG TREN that reviewed EU transport taxation systems ( In 2001/2 he led a project for the Department for Transport on tax reforms to support Travel Plans ( Recommendations from this were incorporated into the 2001 and 2002 budgets. Other work has included exploring how new ways to pay for car use could change behaviour and environmental impacts, for example through Car Clubs.

Dr Graham Parkhurst
Dr Graham Parkhurst has been involved in transport studies since 1991, and in particular has conducted research on the unintended effects of transport policies, notably the role of market costs and subsidies in encouraging car use amongst travellers in response to the provision of park and ride opportunities. In recent years his research has considered the secondary effects on transport policy and taxation of new kinds of road vehicle and fuel; and technological changes necessary to achieve reductions in energy consumption and emissions, but with implications for the magnitude of tax contributions to the Treasury and the means by which they are collected.
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Project Update October 2003

The project update is available as a PDF.

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Contact Details

Dr Stephen Potter
Senior Research Fellow
Department of Design and Innovation
The Open University
Walton Hall
Milton Keynes MK7 6AA

T. 01908 653970/652634
F.01908 654052

Dr Graham Parkhurst
Senior Lecturer in Transport Planning Faculty of the Built Environment
University of the West of England
Frenchay Campus
Coldharbour Lane
Bristol BS16 1QY

T.0117 344 2133
F.0117 344 3308

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Further publications issued by this project are available from the authors on request.

Changes in the cost of motoring and implications for the public transport sector (pdf)
Graham Pankhurst

European perspectives on a new fiscal framework for transport (pdf)
Stephen Potter and Ben Lane

Project update (pdf)
October 2003

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