The Effects of Making the Fixed Car Costs Variable in the Netherlands

In a small crowded country as the Netherlands, the Dutch government is always dealing with congestion and pollution problems. The objective of this paper is to analyze what the effects are from the policy measure of shifting the BPM to the fuel excise duties on congestion and pollution. This shift decreases car prices and increases fuel prices which have an effect on car ownership, car usage and total fuel consumption. These effects are calculated by means of purchase costs elasticities and fuel prices elasticities. The results shows that car ownership, car usage and fuel consumption all increases, and thus also congestion and pollution, with this policy measure. The question if other external factors have an effect on the outcome of the policy measure is also addressed.