Taxation of Fuel and Vehicles When Emissions are Constrained

A tax on fuel combined with exemptions or subsidies for fuel-efficient vehicles is implemented in many countries to fulfill the Paris agreement and curb mileage-related externalities from road traffic. The present study shows that a should be heavier taxation of lowand zero emission targets within transport sector. target fulfilled by adjusting CO2-tax component fuel. user charge designed externalities. prevent motorists avoiding purchasing low- vehicles.