This paper uses the automobile market model Dynamo to assess the effects of replacing car purchase and road taxes with CO2‐differentiated distance‐based user charges in the Netherlands. The effects of this replacement on vehicle size and the composition of the car fleet are estimated, as are the effects on emissions and mileage. We conclude that distance‐based charging schemes can reduce CO2 emissions and other traffic‐related pollutants but can also have unintended impacts on the size, composition and environmental performance of the national car fleet (e.g., car ownership increases, fuel efficiency is reduced and emissions per kilometer driven increases). These unintended effects occur because households react more strongly to one‐time fixed costs than to recurring variable costs and because car costs are reduced for households with relatively low car usage. Environmentally differentiated distance‐based charges can reduce these effects, but only partially.
