Tax Revenue Implications of Decarbonising Road Transport

Scenarios for Slovenia

Published on May 22, 2019

This report investigates how tax revenue from transport fuels could evolve over time as vehicles rely less on fossil fuels, with a focus on the case study of the Republic of Slovenia. Reducing the reliance on fossil fuels in the transport sector is a welcome development from the perspective of its climate and health impacts and of reduced energy dependence. However, under current settings, reduced fuel use will also lead to a loss of tax revenues, which may put stress on government budgets. Based on simulations for Slovenia, with a 2050 horizon, the report provides an in-depth assessment of the taxation of road transport and investigates how tax policy could adapt to declining fossil fuel use in the long term if the objective is to maintain revenues at current levels while taking fairness and efficiency considerations into account. It finds that gradual tax reforms, with an evolving mix of taxes, shifting from taxes on fuel to taxes on distances driven, can contribute to more sustainable tax policy over the long term.


Executive Summary
Introduction and key policy recommendations
Tax revenue scenarios in road transport: A conceptual framework
The Slovenian road transport tax system today
Assessment framework and results for the baseline scenario
Tax reform simulations to stabilise revenues
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Under current policies, tax revenue from diesel and gasoline use in private cars is likely to decline substantially in the coming decades
Tax revenue from passenger cars and trucks for the baseline scenario, 2017-2050


A relatively modest kilometre charge that gradually increases over time may cover the revenue loss from fuel taxes on private carsstrong
Kilometre tax equivalent to cover revenue loss from fuel and carbon taxes on private cars, 2020-2050



Further reading