No. 2/2019: A free rider problem? The effect of electric vehicless on urban toll prices


Several cities around the world try to internalise congestion costs from road traffic by instituting charges for entering their city centres. The revenues collected from these charges are often redistributed to improve conditions for motorists, cyclists, pedestrians and public transport. At the same time, many schemes allow for exemption of cleaner vehicles, which might offset the reduction in congestion and reduce revenue. In this paper, I assess the effects of exempting electric vehicles from charge on the charge level. Using panel data of Norwegian cities with urban toll rings, I exploit regional variation, and and find that a higher share of electric vehicles increase toll charges. The results imply that owners of conventional cars pay 2.5 NOK (0.3 USD) more per passing because of the exemption. The estimates are robust to variations in estimation method and sample. As the majority of electric vehicle owners have above-average income, exempting electric cars from toll charges suggests a distribution effect that have implications for social welfare.