THE ROLE OF FUEL EXCISE TAX IN CONTROLLING CAR DEPENDENCE IN THE EXAMPLE OF ESTONIA Helen Poltimäe...
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THE ROLE OF FUEL EXCISE TAX IN CONTROLLING CAR DEPENDENCE IN THE EXAMPLE OF ESTONIA Helen Poltimäe University of Tartu ESEE Conference, 14-17 June 2011
THE ROLE OF FUEL EXCISE TAX IN CONTROLLING CAR DEPENDENCE IN THE EXAMPLE OF ESTONIA Helen Poltimäe University of Tartu ESEE Conference, 14-17 June 2011
THE ROLE OF FUEL EXCISE TAX IN CONTROLLING CAR DEPENDENCE IN
THE EXAMPLE OF ESTONIA Helen Poltime University of Tartu ESEE
Conference, 14-17 June 2011
Slide 2
Background Car ownership and use increases with economic growth
The energy intensity of Estonian economy is one of the highest in
the EU Ecological tax reform initiated by Estonian Government since
2005 Transportation issues tackled by fuel excise tax Passenger
transport by car has increased by 2 times in 1995-2008, by bus
increased by 20%, by tram and rail decreased by 30%
Slide 3
Environmental tax revenues in 2007
Slide 4
Average CO 2 emissions of new passenger cars
Slide 5
The objective of the paper... is to find out, how sensitive is
gasoline demand in Estonian household sector to income and price
changes and whether it is possible to control increasing car
dependence by fuel excise tax Behavioural effects (cost-covering,
incentive and revenue-raising taxes) Distributional effects (income
elasticity) The issue has been studied in developed countries, but
not in catching-up countries Higher economic growth EU accession
process
Slide 6
Some results of relevant studies Authors and year of the
studyCountryMethodologyData used Income elasticity Price elasticity
Goodwin (2004)Meta-analysis Different studies 1.08-0.63 Graham ja
Glaister (2004)Meta-analysis Different studies 0.93-0.77 Brons et
al (2008)Meta-analysis Different studies -0.84 Nicol (2003)
USAAIDSMicro-data0.56-0.03 CanadaAIDSMicro-data0.44-0.58 Kayser
(2000)USA2 SLSMicro-data0.48-0.23 Brnnlund, Nordstrm
(2004)SwedenAIDS Micro and macro-data -1.18 Labandeira et al
(2005)SpainAIDSMicro-data1.79-0.11 Barros, Pietro-Rodriguez
(2008)SpainAIDSMicro-data1.25-0.82 Asensio et al
(2002)SpainProbitMicro-data0.90 Sardianou (2008)Greece2
SLSMicro-data0.52 Aasness, Larsen (2003)Norway2 SLSMicro-data0.70
Wadud et al (2009)USAOLS, SURMicro-data0.38-0.20 [1] [1] If
multiple elasticities are brought out in studies, the ones of
middle income quintile are used
Slide 7
Data and method Estonian Household Budget Survey 2000-2007
Gasoline quantity consumed is calculated with the help of prices
OLS, WLS and panel data analysis income gasoline price size of
household urban/rural
Slide 8
Problems with data Gasoline expenditures = 0 Gasoline
expenditures > 0 No car in a household48%5% Household owns or
uses a car16%31%
Slide 9
Estimation results OLS (without exceptions) Weighted LS Fixed
effect model Income0.003*** 0.001*** Gasoline
price-3.647***-3.975***-3.271*** Household
size1.961***1.409***3.377** Urban/rural-6.096***-4.026***...
Constant62.162***45.929***70.644*** Income
elasticity0.43***0.42***0.16*** Price
elasticity-0.59***-0.62***-0.53***
Slide 10
Regression results by income quintiles 1st quintile2nd
quintile3rd quintile4th quintile5th quintile
Income0.0010.005***0.002*0.004***0.000* Household
size4.848***-0.4100.058***-1.422*2.264** Gasoline
price0.193-2.052***-1.539*-2.298**-2.077
Urban/rural-1.009-3.852**-10.143***-10.940***-15.346***
Constant20.440***41.714***61.846***65.088***111.370*** Income
elasticity0.080.58***0.25*0.55***0.02* Price
elasticity0.05-0.43***-0.26*-0.31**-0.22
Slide 11
Discussion of results Various models provide similar results
When looking at specific households, a strong relationship between
gasoline quantity and household size Income elasticity is lower
than expected (lower than in other relevant studies) and lower than
price elasticity, although should be vice versa The reason for low
income elasticity and high price elasticity: Private consumption?
Tendency to use compensation instead of salary in catching-up
countries? Availability of loans
Slide 12
Price indices and interest rates of loans
Slide 13
Conclusions Fuel excise tax is revenue-raising tax and not
helpful in controlling increasing car dependence The case of
Estonia can be generalized to quickly growing new economies The
obligation of NMS to raise fuel excise to EU minimum level is
necessary for reducing distortions of competition, but not in
addressing energy intensity issues Other complementary measures are
necessary
Slide 14
This research was supported by European Social Funds Doctoral
Studies and International Programme DoRa Thank you!