Tax & subsidise

Set prices to encourage sustainable passenger mobility and freight transport payments

Transport relies on fossil fuels for over 94% of its energy. Zero- and low-carbon transport solutions will scale up only if they can compete on price. Road fuels are taxed relatively heavily - but not nearly to an extent that covers the cost to the environment. Preferential rates exist, too, for example for fuels used by trucks. Meanwhile international aviation and maritime fuels are not taxed at all.

Price signals are a powerful mechanism to steer citizens and businesses to choose less emitting forms of transport. Carbon prices can be set with different tools, notably direct taxes or emissions trading schemes. Purchase taxes on polluting vehicles and targeted subsidies can also help citizens and businesses buy into sustainable transport. Emissions and congestion charges on vehicles in cities have proved effective. Some have reduced local CO2 emissions by around 15%. Nevertheless, road pricing should be fair and equitable: revenue should be used in a transparent way and contribute to measures that effectively reduce CO2 emissions Stockholm, for instance, introduced a congestion charge and used the proceeds to expand its metro network.



Video: 10 Facts about Transport and Climate Change, International Transport Forum (2019)

Article: The Long Flight Towards Clean Aviation, OECD Observer (2017)

Policy Brief: How to Make Urban Mobility Clean and Green, International Transport Forum (2018)

Copyright: Cyclist and tram: Shutterstock/Timelynx