Distance-based charges in Great Britain

We estimate the reduction in tax revenues that would result from the electrification of road transport in Great Britain over the period 2025–2050 and a revenue-neutral distance-based charge to recoup these revenues. Our model uses the assumptions and data from the Common Analytical Scenarios produced by the Department for Transport, 2023a , Department for Transport, 2023b . We find that under fast decarbonisation scenarios the revenues from fuel duty, VAT on the pre-tax price of fuel and on fuel duty, practically disappear, and under slow decarbonisation scenarios, they decrease substantially by 2050. The decrease is between 40% and 50%. Our revenue-neutral distance-based charge is designed to vary with vehicle type and trip purpose (work/non-work), and ranges from 0.4–3.8 pence per km in 2025, to 2.2–34.6 pence per km in 2050, depending on the vehicle type/trip purpose combination, the scenario, and the elasticity assumed. Importantly, although it applies on top of the fuel duties and is payable by both electric vehicles and fossil fuel vehicles, electric vehicles continue to offer significant cost savings. • Revenues from fuel taxes will decrease substantially or practically disappear by 2050. • The revenue-neutral distance-based charge range is 0.4–3.8 p/km in 2025 and 2.2–34.6 p/km in 2050. • The government in Great Britain should introduce a distance-based charge. • The distance-based charge could be levied on all power trains and differentiated by vehicle type/trip purpose. • The distance-based charge could be applied on top of the fuel duties currently in place.