Reshaping mobility for the future

How can a reform of taxes and surcharges guide the transport sector towards a sustainable future? Higher CO₂ prices in combination with the abolition of the surcharge introduced by the German Renewable Energy Sources Act (EEG levy), appropriate taxation of company cars, a bonus/penalty system for the purchase of passenger cars, and an additional CO₂ component in the truck toll can make a short- to medium-term contribution here. These are some of the key findings of a study by the Oeko-Institut, the Ecological-Social Market Economy Forum and Professor Stefan Klinski on behalf of the German Environment Agency (UBA).

“The taxation of our mobility stems from the fossil age with crude oil, petrol, etc.,” says Dr Wiebke Zimmer, Deputy Head of the Resources & Transport Division at the Oeko-Institut. “It no longer fits the requirements for sustainable, fair and individual mobility, so it needs to be reformed.” Future-focused transport policy must be aligned to climate targets, social justice criteria and other environmental objectives such as avoidance of noise and pollution or reduced land take. It must also ensure that resources are available to fund sustainable mobility in future.

The reform package: an overview

To that end, by 2030, the CO₂ price in the transport sector should reflect the real costs of climate change mitigation to society, i.e. more than 200 euros per tonne of CO₂. If the prices of fossil-fuelled passenger car mileage increase accordingly, it would then be possible to support and expand alternatives such as public transport, walking and cycling. Abolishing the EEG levy at the same time would reduce the price of electricity, making this a social justice measure for people on lower incomes.

In addition, the national passenger car fleet should be converted to electromobility as soon as possible. This requires more effective incentives for vehicle purchases, such as a bonus/penalty system. The additional revenue from CO₂-intensive vehicles (penalty) could be used to fund a purchase incentive scheme for electric cars (bonus). Electric vehicle purchases would not be funded by taxpayers as a whole, but solely by those who can afford to buy a new car – a more equitable contribution to mitigating climate change.

As a further component, higher taxes should be imposed on the private use of company cars so that there is little or no private usage of these vehicles. Under the current system, the taxable amount is not mileage-dependent and employers generally cover the running costs, creating a powerful incentive to drive the vehicle as much as possible. What’s more, it is mainly higher earners who benefit. The flat-rate tax on company cars thus undermines social justice and is counterproductive from an environmental perspective.

And finally, the issue of how the future transport sector is to be funded is crucial. The energy tax, which currently accounts for the largest share of tax revenue from transport, is set to decrease substantially to 2050, depriving it of its key role as a funding source. The revenue from electricity tax and CO₂ pricing cannot fully compensate for this reduction. In future, more direct funding for the road infrastructure will therefore need to come from users. From today’s perspective, a mileage-based toll for all vehicles – cars and trucks alike – appears to be the best solution here.

Study: Reshaping mobility: Fair, individual and sustainable, by the Oeko-Institut, the Ecological-Social Market Economy Forum and Professor Stefan Klinski (Berlin School of Economics and Law)