Compensating losses in fossil fuel tax revenues: First evidence of public support for a BEV mileage tax

Abstract

The increasing share of battery-electric vehicles (BEVs) goes hand in hand with declining government revenue from fossil fuel taxes. This, in turn, erodes funding for roads and other purposes. One currently considered option by governments for filling the emerging budget gap is a BEV mileage tax. Recent research suggests that public support for a transition from vehicle fuel taxes to mileage taxes for all vehicles is low. But what about a mileage tax on BEVs only? We argue that majority public support for a BEV mileage tax is currently conceivable, given that owners of electric vehicles may be perceived as (partial) free riders, specifically in countries where fuel taxes are earmarked for road infrastructure. Based on a choice experiment with a representative sample of the adult population in Switzerland (n=3283), where such a BEV mileage tax is currently considered, we study overall support and also assess how policy design attributes, such as the mileage measurement method and the chosen tariff system, affect policy preferences. We find that a BEV mileage tax could obtain majority support, specifically for tax designs that account for vehicle weight and power. At the same time, current BEV owners are less supportive of a new BEV mileage tax, indicating that growing BEV ownership could challenge policy implementation. Further, we discuss the risk of how the increase in ownership costs for BEV holders could potentially slow BEV adoption and jeopardize climate targets. The research reported here provides a template for studying the issue in other countries.