Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This study investigates how regular gasoline vehicle drivers’ economic incentive to switch their cars to hybrid ones changes. For this, the paper conducted micro-simulation using vehicle mileage of over 1.8 million real observations. The main results of the simulation is as follows: First, if there’s no support like tax benefit and subsidy, current taxation on vehicle in Korea does not give enough incentive to switch a regular gasoline vehicle to hybrid one. Second, if tax system on vehicle changes from current three-stage taxation (acquisition / possession / driving) to driving-oriented taxation, drivers who have economic incentive to switch to hybrids increase by 46.3%p. Lastly, driving-oriented taxation can provide more economic incentive than current taxation system with lower support. These results imply that tax reform to focus on driving stage can be effective for inducing drivers to purchase high-efficient cars.