Taxation of fuel and vehicles when emissions are constrained

The specification of utility is chosen to be able to study the tradeoff faced by the government when taxes on fuel and vehicles are designed to satisfy a constraint on emissions, and to arrive at optimal tax formulas for fuel and vehicles in this setting. [...] The impact of a tax on purchase of fuel-intensive vehicles on the choice of vehicles is identical with the impact of a subsidy on purchase of fuel-efficient vehicles. [...] The tax on fuel affects the number of fuel-intensive vehicles, ? ? (? ? ? ? , ? ? ? ? ? ? ? ? ), the driving distance of fuel-intensive vehicles, ? ? ℎ? ? ? ? ℎ(? ? ? ? ), and the driving distance of fuel-efficient vehicles, ? ? ? ? ? ? ? ? (? ? ? ? ). [...] Bjertnæs (2019a) shows that the optimal tax on EVs equals the tax on fossil fuel vehicles when the road user charge is based on GPS tracking, the tax on fuel equals the marginal damage of CO2 emissions, and other market imperfections are absent8. [...] The impact of emissions-based taxes on the retirement of used and inefficient vehicles: The case of Switzerland, Journal of Environmental Economics and Management, 88, 234-258.