Assessing the Barriers to Greener Fiscal Measures and Ecological Tax Reform in the Transport Sector

Assessing the Barriers to Greener Fiscal Measures and Ecological Tax Reform in the Transport Sector

David Browne (Trinity College, The University of Dublin, Ireland), Brian Caulfield (Trinity College, The University of Dublin, Ireland) and Margaret O’Mahony (Trinity College, The University of Dublin, Ireland)
DOI: 10.4018/978-1-61350-344-7.ch002

Abstract

However, it is possible that achieving ETR through full internalisation of external costs could be contentious due to political concerns over the potental impact on lower socio-economic groups and rural communities as well as commercial concerns over the competitiveness of the freight sector and macroeconomic impacts.
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Introduction

Transport causes a significant number of economic, social and environmental costs, resulting from, inter alia, congestion, opportunity costs associated with travel times, social exclusion, accidents and fatalities, air pollution, greenhouse gas (GHG) emissions, noise, waste, water pollution, loss of biodiversity and land fragmentation. Delucchi (2003) estimates that environmental externalities account for 36-64% of all external costs of motor vehicle use and 3-16% of the social costs of motor vehicle use. However, these externalities are often under-priced or not internalised at all (Calthrop and Proost, 1998; Proost et al., 2002; Litman, 2009).

Thus, users are not aware of the marginal external costs of their activities and do not factor this into their purchasing patterns or consumer behaviour, unless such costs are immediately transparent and/or vary with vehicle use. Lakshmanan et al. (2001) argue that transport users do not accurately perceive variable costs or the full monetary costs of a trip or journey and only consider direct costs such as parking or time costs. Furthermore, evidence suggests that consumers are more likely to consider the cost of vehicle purchases and do not consider long-run fuel or operating costs over the lifetime of the vehicle.

The objectives of the chapter are to: (1) provide an overview of how efficient pricing and ecological tax reform (ETR) could deliver a more sustainable transport system and minimise the negative impacts of transport; (2) present an overview of fiscal measures that are applicable in the transport sector; (3) identify potential barriers to ETR; and (iv) provides selected examples of ETR in the European Union (EU). The chapter concludes by suggesting that greater focus should be made on internalising external costs in a variable usage taxation system.

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