A recent study indicates that the impact of fuel tax hikes on regional diesel prices depends partly on the income level and population density of the region. (Credit: Heikki Saukkomaa – Lehtikuva)

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RESEARCHERS at the VATT Institute for Economic Research, Labour Institute for Economic Research and University of California, Berkeley have calculated how changes in car and fuel tax rates have shaped the vehicle fleet in Finland, Norway and Sweden.

The Finnish government adjusted the tax rates in 2003, 2008 and 2012 in an attempt to encourage car owners to upgrade to lower-emission cars.

The adjustments, however, have hardly had any effect on the vehicle fleet, resulting only in a slight and momentary up-tick in the sales of new cars and a marginal removal of old cars from the fleet, according to VATT. Finns thus continue to drive older and less valuable cars than motorists in Norway and Sweden.

“The number of newly registered cars increased momentarily following the introduction of tax revisions in Finland in 2003 and 2012, but it is unclear whether the change was a consequence of revisions in car taxes,” reads a press release from VATT.

“The tax revisions also seem to have a minor impact on the carbon dioxide emission intensity of new cars, but the changes in emissions are not significant. The share of diesel cars, on the other hand, rose sharply in all three countries following the adoption of taxes based on carbon dioxide emissions.”

The study also found that increases in fuel tax rates have had a greater impact on diesel prices in rural than urban regions.

VATT in December reported that the increases had a 15–20 percentage point greater impact on diesel prices in low-income regions than in high-income regions. “A smaller portion of the increases was moved to consumer prices also in more densely populated and urban-like areas,” it added.

While 60 per cent of the increases were transferred to consumer prices in regions with high-income households and high population density, the corresponding percentage in regions with low-income households and low population density was 80 per cent.

Aleksi Teivainen – HT