The Role of Excise Duties on Fuel in Reducing CO2 Emission Levels from Road Transport: A Dutch Case Study

Abstract

By design, excise duties are primarily a tax which serves to generate revenue for the central government. However, when they are placed on fuels they can, from a consumer point of view, be regarded as similar to carbon taxes. Carbon pricing, and carbon taxes in particular, are often championed by experts in relation to reducing carbon emissions. Based on these aforementioned notions, this research set out to investigate the role excise duties on fuel can play as an intervention employed by policy makers looking to reduce CO2 emissions. With this goal in mind, a Dutch case study is performed. This case study utilizes the synthetic control method to empirically investigate if the increase in Dutch excise duties on gasoline can be causally linked to CO2 emission reductions from road transport. Ultimately, the research found that an increase in the excise duty on gasoline can result in a significant decrease in per capita emissions. These findings resonate with the literature, and point towards how excise duties can play a part in strategically designed environmental policies. From a policy maker’s perspective, this means that in combination with complementary environmental policies such as technology mandates, raising the price of excise duties on fuel could prove to significantly contribute to emissions reduction goals.