Well-To-Wheel Fiscal Systems Can they accelerate the introduction of alternative fuels?

Research question & main conclusions Can WTW-based fiscal systems accelerate the introduction of alternative fuels? Introduction of some alternative fuels may be accelerated The competitive position of biofuels improves The competitive position of CNG is similar The competitive position of zero-emission vehicles deteriorates WTW-based systems are feasible… …however administratively complex WTW-based systems produce undesired side-effects… A shift to diesel vehicles may be expected Passenger car travel demand may increase 18-9-2018

Content INTRODUCTION What is the existing system and why change it? FEASIBILITY WTW-based systems can provide a feasible alternative for the existing system ALTERNATIVE FUELS WTW-based systems provide a fiscal incentive for other alternative fuels than the existing system SIDE-EFFECTS WTW-based fiscal systems introduce side-effects and impact policy goals other than alternative fuels 18-9-2018

DIFVER A. INTRODUCTION 18-9-2018

A. INTRODUCTION Fiscal policy can help to tackle the challenges that the transport sector faces CHALLENGES CO2 emissions lead to climate change Increasingly constrained supply of fossil fuels OPTIONS Reduction of transport volume More efficient vehicles Alternative, lower-carbon fuels POLICY INSTRUMENTS CO2 standards (Reg 443/2009/EC) 6% CO2 emission reduction (FQD; Dir 2009/30/EC) Mandatory ren. energy share (RED; Dir 2009/89/EC) National obligations & subsidies FISC. POLICY Within this context, fiscal policy can accelerate the introduction of alternative fuels 18-9-2018

The fiscal system has gradually become ‘greener’, with effect on sales A. INTRODUCTION The fiscal system has gradually become ‘greener’, with effect on sales 2007 2009 2008 Sales by energy label Bonus/malus energy labels 2006-2009 CO2 charge (‘slurptax’) 2008-2009 Exemption BPM/MRB 2008-… > Changes required to prevent tax income decline Source: Ecorys (2011), Fiscale stimulering (zeer) zuinige auto’s 18-9-2018

A. INTRODUCTION The existing fiscal systems already includes elements that are based on (TTW) emissions Current forms of taxation related to private passenger cars Tax base Levied… Registration tax (BPM)1), 2) Fuel type TTW CO2 emissions …once, upon registration Ownership tax (MRB)3) Deadweight …periodically (yearly, quarterly, monthly) Excise duty (“accijns”) …at point of fuel sales 1) The replacement of the list price component by the CO2 based component has been assumed complete. 2) The discount for diesel vehicles emitting less than 5 mg of PM10 per kilometre has been ignored in this study. 3) In addition, the MRB differs per province. Note: Value-added tax (BTW) applies to vehicle and fuel. It is left unchanged and is therefore omitted here, but is included in all results. > This study has investigated how WTW-elements can be introduced 18-9-2018

Calculation of WTW-emissions in the context of this study A. INTRODUCTION Calculation of WTW-emissions in the context of this study Calculated JRC, Concawe, EUCAR (2007) - Well- from: to-Wheels Analysis of Future Automotive Fuels and Powertrains in the European Context and: ECN/PBL reference projections Derived from: JRC, Concawe, EUCAR (2007) - Well-to-Wheels Analysis of Future Automotive Fuels and Powertrains in the European Context 18-9-2018

A. INTRODUCTION Introducing WTW-elements can make the polluter pay and prepares the fiscal system for the future Note: Based on the emissions of a new, medium-sized, average efficiency passenger car 18-9-2018

A. INTRODUCTION The proposed changes in the Autobrief influence some of the conclusions in the present study > Impacts highlighted where relevant > Work in progress 18-9-2018

DIFVER B. FEASIBILITY 18-9-2018

Any fiscal system meets a number of challenges B. FEASIBILITY Any fiscal system meets a number of challenges Passenger car travel demand Competitiveness freight sector Energy use zero-emission vehicles Multiple production pathways Refuelling abroad Secondary fuel use in multifuel vehicles Alignment with existing law and regulations Government income 18-9-2018

Unless tariffs (and brackets) are adapted, tax revenue will decline substantially Tax revenue in 2010, 2020 and 2030 in the three systems 18-9-2018

B. FEASIBILITY Feasibility fully WTW-based system questionable, two alternatives have been designed Properties of the existing and alternative systems Existing system Alternative 1 Alternative 2 Tax base BPM/MRB TTW g/km Fuel specific WTW g/km Generic Tariff structure BPM/MRB Progressive with exemption Progressive, no exemptions Lower tariffs to compensate for higher excise duty tariffs Tariffs excise duty Separate tariffs for all fuels Single tariff (g/km WTW), based on average over all fuels Single tariff (g/km WTW), based on current petrol tariff 18-9-2018

DIFVER C. ALTERNATIVE FUELS 18-9-2018

C. ALTERNATIVE FUELS Three groups of alternative fuels have been analysed for an average user FUELS Gaseous fuels CNG Biogas Liquid biofuels E85 Biodiesel Zero-emission vehicles PHEV* BEV FCV VEHICLE & USE Vehicle New Average efficiency Use 15,000 km/yr COSTS Purchase costs** Vehicle costs (incl. VAT) BPM Ownership costs MRB Use costs Fuel costs Excise duty VAT * PHEVs are only truly zero-emission vehicles when operated in all-electric mode. ** Fully depreciated over 8 years. 18-9-2018

Gaseous fuels: Similar position for CNG, position biogas improves C. ALTERNATIVE FUELS Gaseous fuels: Similar position for CNG, position biogas improves CNG is cheaper than petrol in all systems Alternative 1 provides slightly stronger incentive than existing system Alternative 2 provides similar incentive as in existing system Biogas is cheaper than CNG in the alternative systems In the existing system, biogas is approx. as expensive as petrol In both alternative systems, biogas is cheaper than CNG Biotickets make biogas cheaper than petrol in all systems Autobrief: Higher excise duties do not change conclusions Fuel costs are a relatively small share of total costs of gaseous fuels 18-9-2018

C. ALTERNATIVE FUELS Liquid biofuels : Position significantly better in the alternative systems E85 and biodiesel are cheaper than conventional fuels in both alternative systems There are no fiscal incentives for liquid biofuels in the existing system Low taxation compensates for high fuel costs in the alternative systems Including biotickets changes the picture In the existing system, biotickets lower the costs of liquid biofuels to the level of conventional fuels In the alternative systems, biotickets lower the costs of liquid biofuels even further 18-9-2018

C. ALTERNATIVE FUELS Zero-emission vehicles: Fiscal incentives strongest in the existing system ZEVs (almost) cost competitive in the existing system ZEVs are exempt from taxation Only BEVs are cost competitive in the alternative systems Higher taxation renders PHEVs more expensive than petrol vehicles Expected cost decreases >> ZEVs cheap future option Very efficient conventional vehicles compete with ZEVs Currently, very efficient conventional vehicles are cheaper than ZEVs In the future (2030), approximately equally expensive Adjustments proposed in the Autobrief change conclusions PHEV (in our analysis) no longer meets MRB exemption limits Very efficient vehicles more expensive than ZEVs in the future 18-9-2018

DIFVER D. SIDE-EFFECTS 18-9-2018

D. SIDE-EFFECTS The alternative systems may lead to side-effects and impact on other policy goals More favourable position for diesel vehicles in alt. systems can lead to an increase of diesel share in the veh. stock Substantial tariff increases will be required in all systems to keep tax revenue stable MRB tax burden shifts to older vehicles in alt. systems Passenger car travel demand may increase (esp. Alt. 1) The impact on security of supply is limited Both alternative systems are administratively complex Effects on air quality are uncertain 18-9-2018

DIFVER conclusions 18-9-2018

CONCLUSIONS WTW-based fiscal systems provide a stronger fiscal incentive for some alternative fuels… WTW-based systems seem to provide a feasible alternative for the current system WTW-based systems stimulate different alternative fuels than the existing system, more in line with ‘polluter pays’ The alternative systems provide a (much) stronger incentive for biofuels The attractiveness of CNG is similar across all systems, the attractiveness of biogas is better in the alternative systems The existing system provides a stronger incentive for zero-emission vehicles 18-9-2018

…but come with some side-effects and caveats CONCLUSIONS …but come with some side-effects and caveats A shift to diesel vehicles can be expected in the alternative systems The incentive for very efficient conventional vehicles is about equal to the incentive for alternative fuel vehicles But Autobrief adjustments will mitigate this issue The alternative systems… …may increase passenger car travel (alternative 1) …are administratively complex …have uncertain effects for air quality 18-9-2018

CONCLUSIONS The changes announced in the ‘Autobrief’ alter some of the original study conclusions Very efficient conventional vehicles are no longer tax exempt, and are therefore more expensive than BEVs, FCVs, and PHEVs MRB tax burdens for vehicles with relatively low emissions are higher (between the new and old exemption limits) Costs for CNG and E85 vehicles in the alternative systems are higher 18-9-2018

DIFVER ADDITIONAL SLIDES 18-9-2018

Calculation of WTW-emissions in the context of this study BACKUP SLIDES Calculation of WTW-emissions in the context of this study Calculated JRC, Concawe, EUCAR (2007) - Well- from: to-Wheels Analysis of Future Automotive Fuels and Powertrains in the European Context and: ECN/PBL reference projections Derived from: JRC, Concawe, EUCAR (2007) - Well-to-Wheels Analysis of Future Automotive Fuels and Powertrains in the European Context 18-9-2018

BACKUP SLIDES Tax revenue is kept stable by adjusting tariffs and tax brackets to efficiency improvements 18-9-2018

BPM tariff structure in the three fiscal systems BACKUP SLIDES BPM tariff structure in the three fiscal systems Existing system Alternative 1 Alternative 2 18-9-2018

MRB tariff structure in the three fiscal systems BACKUP SLIDES MRB tariff structure in the three fiscal systems Existing system Alternative 1 Alternative 2 18-9-2018

Excise duties in the three fiscal systems BACKUP SLIDES Excise duties in the three fiscal systems 18-9-2018

BACKUP SLIDES The graphs on the next slides can be interpreted in the way illustrated below Costs considered in the scope of this study 18-9-2018

BACKUP SLIDES The position of CNG is better than in the existing system in Alternative 1, similar in Alternative 2 User costs for CNG in the three fiscal systems -15% -22% -13% Use (additional 7500km) Use (7500km) Ownership Purchase 18-9-2018

BACKUP SLIDES FFVs (using E85) are more attractive from a cost perspective in the alternative fiscal systems User costs for FFVs in the three fiscal systems +7% -26% -1% Use (additional 7500km) Use (7500km) Ownership Purchase 18-9-2018

BACKUP SLIDES Biodiesel is more attractive (from a cost perspective) in the alternative fiscal systems User costs for 100% biodiesel in the three fiscal systems +5% -25% -4% Use (additional 7500km) Use (7500km) Ownership Purchase 18-9-2018

BACKUP SLIDES Fiscal incentives for zero-emission vehicles are strongest in the existing system User costs for zero-emission vehicles in the three fiscal systems Use (additional 7500km) Use (7500km) Ownership Purchase 18-9-2018

BACKUP SLIDES Expected cost reductions will make zero-emission vehicles attractive options in all fiscal systems Expected user costs for zero-emission vehicles in the three fiscal systems in 2020 Use (additional 7500km) Use (7500km) Ownership Purchase 18-9-2018

BACKUP SLIDES Incentive for very efficient vehicles approximately similar to incentive for alternative fuels Expected user costs for vehicles 40% more efficient than average in the three fiscal systems in 2030 18-9-2018

BACKUP SLIDES More favourable position for diesel vehicles in alt. systems can lead to an increase of diesel share User costs for conventionally fuelled vehicles Currently, ~80% of vehicle stock are petrol vehicles 18-9-2018

BACKUP SLIDES The alternative systems produce fairer tax burdens with respect to CO2 emissions Tax burden in relation to CO2 emissions [g/km] 18-9-2018

D. SIDE-EFFECTS Substantial tariff increases will be required in all systems to keep tax revenue stable Indexation of tariffs required to keep tax revenue stable (2010 = 100) 18-9-2018

BACKUP SLIDES Diesel is the cheapest option in the alternative systems, irrespective of annual distance User costs by annual distance for the three fiscal systems Existing system Alternative 1 Alternative 2 18-9-2018

BACKUP SLIDES Average annual distance of private passenger cars in the Netherlands is 15000 km per year Breakdown NL vehicle stock by annual distance Source: ECN/PBL reference projections 18-9-2018

The alternative systems take WTW-emissions of CNG into account BACKUP SLIDES The alternative systems take WTW-emissions of CNG into account Differences in user costs between the three fiscal systems for different production pathways for CNG 18-9-2018

The alternative systems take WTW-emissions of E85 into account BACKUP SLIDES The alternative systems take WTW-emissions of E85 into account Differences in user costs between the three fiscal systems for different production pathways for E85 18-9-2018

The alternative systems take WTW-emissions of biodiesel into account BACKUP SLIDES The alternative systems take WTW-emissions of biodiesel into account Differences in user costs between the three fiscal systems for different production pathways for biodiesel 18-9-2018

BACKUP SLIDES The very low MRB exemption limit impacts the MRB structure in the new analysis MRB structure in the original and new (including ‘Autobrief’ changes) analyses 18-9-2018