A comparative analysis of taxes and CO2 emissions from passenger cars in the Nordic countries

image of A comparative analysis of taxes and CO2 emissions from passenger cars in the Nordic countries

The report discusses how economic instruments can be used to reduce CO2 emissions from passenger cars in the Nordic countries. The analysis indicate that The registration tax and the annual circulation tax can contribute to a reduction in the average CO2 emission from new cars. Company car schemes in the Nordic countries provide incentives for larger cars and increased driving because of subsidies, and this has long term effect as a large share of new cars are registered as company cars but are used as private cars most of their lives. CO2 differentiated taxes can provide incentives to consumers to purchase CO2 efficient cars. Targeted broader packages which besides providing tax incentives also offer advantages to more environmentally friendly cars can be more effective than general tax increases. Transparency of targets and instruments is crucial for a large diffusion of CO2 efficient cars. The report has been commissioned by the Working Group on Environment and Economics under the Nordic Council of Ministers. The study was carried out by COWI.

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Significance of consumer car choices

In the Nordic countries, the average car is on the road for approximately 18 years once purchased. This highlights the importance of the purchase situation, as it is at this point that the total CO2 emissions from passenger cars are determined. In the coming years, a number of new car types with significantly lower CO2 emissions per km will be launched on the Nordic market. The tax system may be the decisive factor for the willingness to buy such cars.

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