The government's goal in implementing the car tax is to reduce the negative environmental impact of transportation and encourage people to make more eco-friendly choices. This means influencing consumers to either use their existing vehicles longer or to purchase newer cars with lower CO2 emissions. However, the car-buying boom in the final quarter of last year proved otherwise: Estonian residents continue to prefer older vehicles with higher CO2 emissions.

Statistics from the last three months show that when it comes to both new and used cars, consumers favor older internal combustion engine (ICE) vehicles that are larger and have higher CO2 emissions.

The import of used cars from Sweden and Finland also increased, and in these cases, larger vehicles were brought to Estonia. According to the Transport Administration, 13,335 diesel vehicles with an average age of 9.45 years were imported into Estonia from abroad in the first 11 months of 2024. Additionally, diesel cars accounted for 23.65 percent of first-time registrations in 2023, but this figure rose to 27.20 percent in 2024 – an increase of 3.5 percent. In December alone, nearly 7 percent more diesel cars were registered compared to December 2023.

As a result, the artificially created car-buying boom led to a significant increase in diesel cars on Estonian roads – vehicles we likely would not have seen without the car tax, or at least not at such a pace. These cars will remain in use for years, delaying the primary goal of the car tax. While car dealers, financing companies and the state (through tax revenue) benefited from the boom, did we really get closer to the goal of making the vehicle fleet newer, safer and more environmentally friendly? Hardly.

For Estonians, a car is a status symbol. Few other EU countries have such an impressive car fleet as Estonia. This is understandable, given that a car is essential for many people's daily lives – particularly in larger families living outside urban centers, where public transport is limited but jobs, schools and extracurricular activities are still mostly in major cities.

Although many people would likely prefer to live car-free or to give up a second family car, in practice, that is often not possible. Tallinn's traffic chaos – caused by the city government's decision to replace driving lanes with bike paths – perfectly illustrates this. But how do you get from Rae, Harku, Viimsi, Jõelähtme or other neighboring municipalities to the city center by bike with two or three children? And if you're spending a large part of your day behind the wheel, why not drive a car you actually enjoy?

Of course, many would love to own an electric vehicle, but the reality is that most people still cannot afford one. The price of a larger diesel vehicle is equivalent to that of a smaller electric car, which simply cannot accommodate a whole family. As a result, the practical choice remains a reliable diesel car. Trying to influence that decision through a tax is a detached and unrealistic approach.

In the coming years, we will definitely see an increase in the sale of electric vehicles and new cars with lower CO2 emissions, but this change won't be driven by the car tax. Instead, it will be the result of increasingly strict EU regulations imposing lower CO2 limits on car manufacturers, forcing them to produce vehicles with ever-lower – or even zero – emissions.

Moreover, technological advancements will make electric cars more affordable and competitive with internal combustion vehicles. This will likely increase their share in the market, but mainly as second cars for families.

The car tax system has been designed in a way that does not promote the renewal of the vehicle fleet or reduce transportation's negative environmental impact. On the contrary, it is causing the vehicle fleet to age and pollute more. However, the tax does help fill the state's budget deficit – and perhaps that is how we should start framing the discussion.

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