on fuel duty and modal shift

no idea how or why this came to be in my backlog, but it answers a common claim or two…

Potter, Stephen; Enoch, Marcus; Rye, Tom; Black, Colin and Ubbels, Barry (2006). Tax treatment of employer commuting support: an international review. Transport Reviews, 26(2), pp. 221???237.

The extent to which the price of fuel is an effective tool to influence modal choice has been the subject of some contention. Joseph (2000) noted that rises in traffic levels in Britain over the decade to 2000, during which time there was a policy to increase road fuel duty in real terms, had been relatively low, despite levels of economic growth that have previously stimulated significant traffic growth. Bates et al (2004) have modelled the possible effect of fuel duty on congestion and state that ???to keep [traffic] demand at its present levels and therefore congestion on average no worse than it is now, would require motoring charges or tax to be five times the current level of fuel duty, an annual increase of 6% every year (the same rate of increase as the fuel duty escalator which led to the fuel duty protests after only a few years)??? (p 5).

Joseph considered the key difference between economic growth generating high car traffic growth in the past and not doing so now was the impact of high fuel prices. It is likely that capacity constraints in the UK are also playing a role in slowing traffic growth. In general there is concern that a single policy measure can be ineffective and that the effects of the taxation system upon modal choice requires a more comprehensive approach and understanding. This issue is discussed in detail in the European Council of Ministers of Transport report ???Internalising the Social Costs of Transport??? (ECMT, 1997), which advocates a synergistic mix of taxation and charging instruments… Broadly the view is taken that a carefully designed mix of various economic instruments and regulations is needed to achieve political acceptance and practicality.

These studies suggests that simply raising the tax rate of existing fiscal measures may not be the most efficient way to address environmental and transport policy objectives. This was because the tax measures had not been designed to do this. The argument that a different transport taxation regime is needed is reinforced by growing political pressures. For instance transport taxation in the United Kingdom, particularly upon fuel, is an increasingly controversial subject. There is a widespread perception that the motorist is simply a convenient source of revenue and that the environmental justification of taxation is little more that a matter of presentation. This led to the autumn 2000 ???fuel protests???, with the UK alone reducing annual automobile and truck taxation by nearly ??2 billion (~$US3 billion). The UK and other European governments are now very wary of simply charging higher rates for existing transport tax measures.

Thus, well before they have reached an economic ???fair and efficient??? level, existing vehicle and fuel taxation measures have hit serious barriers, which politicians do not appear to have the stomach to tackle.


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