Working Papers,
Swedish National Road & Transport Research Institute (VTI)

Abstract: We simulate the external costs from road transport in a 2040 scenario where all gasoline vehicles are replaced by EV’s, and we do this for the densest regions of Sweden with a similar degree of urbanization to many other European countries, including cities, suburbs, towns and rural areas. We analyse the optimal kilometre tax based on three motives for taxing use and ownership of EVs: internalizing external cost, cost recovery of the public spending on the road sector, and fiscal taxation for raising revenue over and above what is justified by the two previous principles. We conclude that the optimal Pigouvian tax will be too low to justify the cost of a nationwide GPS-based kilometre tax for many years ahead, for which enforcement would drive the cost. Taxes collected based on roadside equipment systems in the big cities and surrounding highways would be a substantially cheaper way of internalizing most of the congestion cost. A shift from fuel taxes to national congestion taxes would, however, imply a large transfer of resources from the biggest city or cities to the rest of the country, where most of the kilometres are driven

Keywords: Kilometre tax; Milage tax; Congestion charges; Equity; Infrastructure investments; Electric cars; Fiscal taxes; Benefit principle

JEL-codes: R12; R41; R42

30 pages, June 7, 2021

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