Assessment of the impact of motor-fuel taxation on
transport behaviour and climate change in the Czech
Republic using an estimated econometric model
Jan Brůha, Hana Brůhová-Foltýnova, Vı́tězslav Pı́ša
KOLIN I NSTITUTE OF T ECHNOLOGY
Climate Change Targets & Urban Transport Policy
WCTRS SIG G3 Urban Transport Planning and Policy
L-Università ta’ Malta, 13-14 April, 2015
Outline of the presentation
This presentation:
1. overviews motor fuel taxation in the Czech Republic
I
and compares it to the situation in neighbouring countries;
2. presents an econometric model of motor fuel taxation
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that takes into the account the fuel tourism;
3. discuss the uncertainty in estimated parameters.
Motor Fuel Taxation in the Czech Republic
European Framework
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VAT Directive 2006/112/EC
I
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minimal standard rate is 15%
Energy Taxation Directive
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minimal rate for diesel 330 EUR/1000 litres from 2010
minimal rate for petrol 359 EUR/1000 litres
Changes in Taxation of Petrol
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2010: VAT 19% ! 20%
2013: VAT 20% ! 21%
2010: EXT 11 840 CZK/1000 l ! 12 840 CZK/1000 l
Changes in Taxation of Petrol
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2010: VAT 19% ! 20%
2013: VAT 20% ! 21%
2010: EXT 9 950 CZK/1000 l ! 10 950 CZK/1000 l
Motor Fuel Prices in Central Europe
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Motivation for the model
We present and estimate an econometric model of the fuel
demand in Central Europe:
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the model takes into the account fuel tourism,
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fuel tourism can increase price elasticity of fuel demand,
I
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which has nontrivial implications for fiscal policy.
Nevertheless, the changes in consumption affect GHG
emissions.
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and the fuel tourism affect also the effectiveness of taxes
for mitigating the GHG emissions (e.g. Banfi et al., 2005)
Related research for Central Europe
Fiscal consequences for the region recently addressed by:
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Novysledlák and Šrámková (2011) find on the Slovakia
case that the effect of fuel tourism is not strong enough to
decrease fuel taxes on fiscal grounds.
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Pı́ša (2013) and Brůha, Brůhová-Foltýnová and Pı́ša
(2014) confirms this finding on Czech data.
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Ševčı́k and Rod (2010) argue for the opposite.
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hence, the evidence is mixed ..... and more research can
be beneficial.
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The above mentioned studies did not address the issue of
CO2 emissions.
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which is a contribution of our research.
Data
Panel data from 2005Q1 to 2013Q4 for the EU countries on:
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Motor fuel consumption
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Motor fuel prices and taxes
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GDP and price indexes
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Exchange rate
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Borders and the distance between capitals
We concentrate on:
Austria, Czech Republic, Germany, Hungary, Poland, and
Slovakia.
Model formulation
Model formulation:
log Cit =
0
+
X Xit
+
y log yit
+
p log pit
+
} log }it
+ "it ,
where Cit is fuel consumption in country i in year t, Xit are
additional regressors (such as time trend), yit is the real GDP,
pit is the real fuel price, and }it is the relative average price of
fuel in neighbouring countries defined as follows:
}it = P
pit
,
j wij pjt
where pjt is fuel price in region j in year t and wij are weights.
Similar model to Pı́ša (2013), but estimated using Bayesian
methods under uninformative priors.
Model estimation
The estimation of parameters
is the goal:
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bayesian panel data model.
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we allow for limited heterogeneity of parameters across
countries.
The quantity of interest is
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p
p
+
},
where
measures the ‘direct’ price elasticity,
} measures the elasticity due to international differences
in fuel prices.
Estimation results
Petrol
p
y
}
Diesel
97.5%
HPD
Posterior
mean
HPD
-1.49
0.29
-1.84
-0.87
1.01
-0.93
-0.28
1.75
-0.00
2.5%
97.5%
HPD
Posterior
mean
-1.42
0.24
-1.88
-0.80
0.97
-0.96
-0.20
1.70
-0.05
2.5%
HPD
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⇠ 1), but the
Both motor fuels are rather elastic ( p =
coefficient p measures elasticity ignoring the international
price competition.
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The coefficient
differential.
}
captures the effect of international price
Simulation scenarios /1
Based on these estimation results, we consider three
hypothetical scenarios:
1. In the Czech Republic, the excise tax on motor fuels will
increase on the level in Germany.
2. The increase increase to the same target will occur in all
CEE countries, with the exception of Poland
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Poland has relatively low motor fuel tax rates and has
relatively long boarders with third countries (Ukraine,
Belarus, Russia) with low motor fuel prices.
3. The increase increase to the same target will occur in all
CEE countries (including Poland)
We stress that the goal is not to assess a concrete policy proposal, but to
show the potential of our framework.
Simulation scenarios /2
We evaluate the impact on:
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motor fuel consumption;
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budget revenues;
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motor fuel consumption (and we can thus estimate the
change in CO2).
Change in the final end-user price (in %):
Scenario I
Scenario II
Scenario III
AT
0
13.8
13.8
CR
15.9
15.9
15.9
Petrol
DE
HU
0
0
0
21.7
0
21.7
PL
0
0
21.2
SK
0
3.7
3.7
AT
0
6.3
6.3
CR
6.4
6.4
6.4
Diesel
DE
HU
0
0
0
9.3
0
9.3
PL
0
0
10.6
SK
0
2.9
2.9
Scenario I – results
Petrol
Change in fuel
consumption
C ZECH R EP.
2.5%
Posterior
HPD
mean
-45.6
-28.1
Diesel
2.5%
Posterior
97.5%
HPD
HPD
mean
HPD
-10.1
-18.1
-11.1
-4.5
97.5%
CE
-1.3
-0.9
-0.4
-0.4
-0.3
-0.1
P OLAND
-0.00
0.82
1.53
0.11
0.39
0.72
Change in fuel
C ZECH R EP.
-875
-578
-245
-777
-488
-204
consumption
TOTAL IN
CE
-511
-339
-161
-407
-239
-74.7
P OLAND
-0.0
44.7
88.6
2.7
55.5
108.5
Change in
C ZECH R EP.
-2.00
-1.35
-0.56
-2.02
-1.27
-0.53
CO2 emission
TOTAL IN
CE
-1.17
-0.77
-0.36
-1.06
-0.62
-0.19
(ths. tons)
P OLAND
-0.00
0.10
0.20
0.01
0.14
0.28
Change in
C ZECH R EP.
-17.3
0.17
17.45
-5.01
1.99
8.61
G ERMANY
-0.00
0.67
1.32
0.01
0.28
0.54
P OLAND
0.01
0.82
1.62
0.02
0.34
0.67
(in %)
(mil. l.)
ET revenues
(%)
AVERAGE IN
Scenario II – results
Petrol
Change in fuel
consumption
(in %)
2.5%
Posterior
Diesel
97.5%
2.5%
Posterior
97.5%
HPD
mean
HPD
HPD
mean
HPD
C ZECH R EP.
-44.2
-27.4
-10.7
-17.5
-10.7
-4.38
CE
-3.38
-1.99
-0.56
-1.51
-0.79
-0.07
P OLAND
-0.00
0.84
1.64
0.02
0.36
0.70
AVERAGE IN
Change in fuel
C ZECH R EP.
-855
-567
-242
-750
-473
-201
consumption
TOTAL IN
CE
-1299
-772
-218
-1407
-752
-66.8
P OLAND
-0.00
45.5
90.1
2.80
57.4
112.2
Change in
C ZECH R EP.
-1.96
-1.29
-0.55
-1.95
-1.23
-0.52
CO2 emission
TOTAL IN
CE
-2.97
-1.76
-0.50
-3.73
-1.95
-0.17
(ths. tons)
P OLAND
-0.00
0.10
0.21
0.01
0.14
0.29
Change in
C ZECH R EP.
-15.9
0.85
17.56
-4.38
2.37
8.68
G ERMANY
-0.00
0.69
1.36
0.01
0.29
0.56
P OLAND
0.01
0.84
1.65
0.02
0.36
0.70
(mil. l.)
ET revenues
(%)
Scenario III – results
Petrol
Change in fuel
consumption
(in %)
2.5%
Posterior
Diesel
97.5%
2.5%
Posterior
97.5%
HPD
mean
HPD
HPD
mean
HPD
C ZECH R EP.
-35.6
-22.5
-9.75
-13.1
-8.14
-3.43
CE
-7.33
-4.38
-1.36
-3.95
-2.19
-0.46
P OLAND
-33.0
-19.7
-7.38
-15.84
-9.16
-2.74
-158
AVERAGE IN
Change in fuel
C ZECH R EP.
-717
-478
-223
-557
-365
consumption
TOTAL IN
CE
-2763
-1669
-528
-3716
-2076
-442
P OLAND
-1524
-960
-386
-2353
-1398
435.4
Change in
C ZECH R EP.
-1.64
-1.09
-0.51
-1.51
-0.95
-0.41
CO2 emission
TOTAL IN
CE
-6.32
-3.82
-1.21
-9.66
-5.40
-1.15
(ths. tons)
P OLAND
-3.50
-2.20
-0.88
-6.12
-3.64
-1.13
Change in
C ZECH R EP.
-7.36
5.72
18.51
-0.08
4.92
9.64
G ERMANY
0.00
0.76
1.50
0.01
0.32
0.64
P OLAND
6.21
19.54
31.9
6.19
12.87
19.29
(mil. l.)
ET revenues
(%)
Conclusion
Our results suggest that:
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one can expect the decrease in CO2 emissions even after
an unilateral increase in motor fuel taxation;
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nevertheless, there is a clear role for international
harmonization;
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although the elasticity with respect to international price
differential is high, it does not seem that the countries are
on the wrong side of the Laffer curve;
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the research on the fuel tourism can be beneficial in
decreasing the overall uncertainty.
Closing slide
Thank you for your attention
vitezslav.pisa@centrum.cz
bruhova@hotmail.com
jan bruha@yahoo.co.uk
The research has been supported by Czech Science Foundation grant no.
14-22932S. The support is gratefully acknowledged.