Simulating the impact of tax incentives using a type choice model for lease cars

Abstract Tax incentives for hybrid and electric cars are one of the possible policy instruments to reduce the CO2 emissions of cars. This paper looks at the impacts of this policy in the context of The Netherlands, where up to 2016 substantial tax incentives were provided to fuel efficient lease cars, especially for hybrid and electric lease cars. For this analysis this paper uses a new model of vehicle type choice. Existing models for the choice among car type alternatives either exclude electric and hybrid cars or are based on stated preference data. In both cases, the models usually focus on privately-owned cars. The car type choice model for lease cars, that is used in this paper, includes electric and hybrid alternatives and is estimated on revealed preference data from lease car users in The Netherlands. Simulations with this model show that the tax incentives provided over the period 2011-2016 have led to a reduction in CO2 emissions of lease cars, but also to an increase in the share of diesel cars and local air pollution.