BusinessGreen.com: Campaign group Transport & Environment says the government can drive further cuts in average new car emissions by shaking up taxes.
The UK must reform its tax regime for the most polluting cars or risk being left in the slow lane by Europe's green vehicle leaders, a campaign group has warned.
A new report by campaign group Transport & Environment (T&E) outlined that tax changes in 2002 drove a steady reduction in new car CO2 emissions to just above the EU average, but this progress had stalled.
Last year, the UK recorded 128.3 grams of CO2 per kilometre, compared to 127g/km across the EU, but T&E says its "below average" annual improvement of 3.5 per cent ranks it twelfth among EU member states and well behind frontrunner the Netherlands, which recorded 109.1g/km and boasts 5.3 per cent of electric vehicles in its national fleet. The UK is actually closer to laggard Germany, on 136.1g/CO2, and Poland, with 138.1g/CO2, than it is to the top spot.
"From a UK perspective, we've seen no real developments to the taxation framework for a number of years," Greg Archer, clean vehicles manager at T&E, told BusinessGreen. "The Treasury needs to look at what it's trying to do in supporting markets for low-carbon vehicles. The government makes strong statements, saying it is supporting low-carbon vehicles, but in reality it has pretty moderate policies compared to other European countries that are driving the market."
The UK does take CO2 emissions into account in levying vehicle excise duty (VED), commonly known as road tax, with electric cars and some hybrids wholly exempt. It also offers subsidies of up to £5,000 off the cost of a new electric car and up to £8,000 for electric vans, but so far these vehicles make up only 0.2 per cent of the UK's fleet.
But, Archer said the VED payments for gas guzzlers was not sufficiently different from more efficient models and the legislation ensuring new car buyers pay for three years of VED up front "hasn't created a big enough price signal to really change people's behaviour at all". Ongoing price freezes for fuel duty also did little to encourage a shift to low-carbon vehicles.
CO2 emissions from new cars in Europe, 2013 (Transport & Environment)
In the UK, company car tax can pose another problem – its current level, below the rate of income tax, is effectively subsidising vehicle purchases – but Germany also performs poorly, with a hefty subsidy that is not differentiated for CO2.
Echoing most of Europe, the UK's company car tax regime encourages buyers towards diesels by setting the same level of tax for both technologies. Diesels have lower CO2 emissions, so can benefit from lower VED, but they pump out particulate matter (PM) and NOx, which is blamed for air pollution and up to 400,000 premature deaths across Europe each year.
Only Denmark and the Netherlands have specific surcharges on diesels – aimed at penalising their contribution to air pollution and discouraging purchases – and both countries occupy lofty positions on the emissions leaderboard.
The Department for Transport had not replied to a request for comment at the time of going to press, but it could argue that lower emissions are not always the result of supportive fiscal regimes. Greece secured the second spot as fewer expensive, gas-guzzling vehicles are being bought in the recession-hit country, while the downturn has encouraged an already existing national tendency to buy smaller vehicles in countries such as Italy and Spain.
But, following the Dutch example of imposing substantial taxes on purchases, adjusted for CO2 emissions – a policy that has driven down average emissions from 157g/km in 2008 to 109g/km in 2013, including an eight per cent drop in 2013 alone – could allow for reductions to be made in a strong UK economy without undue cost.
"We've advocated something akin to the French system, whereby you offer tax support for low-emission vehicles, paid for by taxes on gas guzzlers," Archer says. "In that way, the market gets moved, but it doesn't need to cost the government anything in terms of real money."
He adds that the UK can also make better use of "out-of-the-box thinking" to push the uptake of low-carbon cars: "The UK needs to look at [initiatives such as] preferential parking, which people value very highly in terms of convenience, but don't create a huge drag on the Exchequer in the way that £5,000 grants for electric cars do."
The UK is on track to meet EU regulations limiting average car emissions to 130g/km by 2015 and 95g/km by 2021, according to official statistics. But, given the 31 per cent differential between lab performance and real-world driving, there remains a risk it could miss its national climate goals unless changes are made.
The UK must reform its tax regime for the most polluting cars or risk being left in the slow lane by Europe's green vehicle leaders, a campaign group has warned.
A new report by campaign group Transport & Environment (T&E) outlined that tax changes in 2002 drove a steady reduction in new car CO2 emissions to just above the EU average, but this progress had stalled.
Last year, the UK recorded 128.3 grams of CO2 per kilometre, compared to 127g/km across the EU, but T&E says its "below average" annual improvement of 3.5 per cent ranks it twelfth among EU member states and well behind frontrunner the Netherlands, which recorded 109.1g/km and boasts 5.3 per cent of electric vehicles in its national fleet. The UK is actually closer to laggard Germany, on 136.1g/CO2, and Poland, with 138.1g/CO2, than it is to the top spot.
"From a UK perspective, we've seen no real developments to the taxation framework for a number of years," Greg Archer, clean vehicles manager at T&E, told BusinessGreen. "The Treasury needs to look at what it's trying to do in supporting markets for low-carbon vehicles. The government makes strong statements, saying it is supporting low-carbon vehicles, but in reality it has pretty moderate policies compared to other European countries that are driving the market."
The UK does take CO2 emissions into account in levying vehicle excise duty (VED), commonly known as road tax, with electric cars and some hybrids wholly exempt. It also offers subsidies of up to £5,000 off the cost of a new electric car and up to £8,000 for electric vans, but so far these vehicles make up only 0.2 per cent of the UK's fleet.
But, Archer said the VED payments for gas guzzlers was not sufficiently different from more efficient models and the legislation ensuring new car buyers pay for three years of VED up front "hasn't created a big enough price signal to really change people's behaviour at all". Ongoing price freezes for fuel duty also did little to encourage a shift to low-carbon vehicles.
CO2 emissions from new cars in Europe, 2013 (Transport & Environment)
In the UK, company car tax can pose another problem – its current level, below the rate of income tax, is effectively subsidising vehicle purchases – but Germany also performs poorly, with a hefty subsidy that is not differentiated for CO2.
Echoing most of Europe, the UK's company car tax regime encourages buyers towards diesels by setting the same level of tax for both technologies. Diesels have lower CO2 emissions, so can benefit from lower VED, but they pump out particulate matter (PM) and NOx, which is blamed for air pollution and up to 400,000 premature deaths across Europe each year.
Only Denmark and the Netherlands have specific surcharges on diesels – aimed at penalising their contribution to air pollution and discouraging purchases – and both countries occupy lofty positions on the emissions leaderboard.
The Department for Transport had not replied to a request for comment at the time of going to press, but it could argue that lower emissions are not always the result of supportive fiscal regimes. Greece secured the second spot as fewer expensive, gas-guzzling vehicles are being bought in the recession-hit country, while the downturn has encouraged an already existing national tendency to buy smaller vehicles in countries such as Italy and Spain.
But, following the Dutch example of imposing substantial taxes on purchases, adjusted for CO2 emissions – a policy that has driven down average emissions from 157g/km in 2008 to 109g/km in 2013, including an eight per cent drop in 2013 alone – could allow for reductions to be made in a strong UK economy without undue cost.
"We've advocated something akin to the French system, whereby you offer tax support for low-emission vehicles, paid for by taxes on gas guzzlers," Archer says. "In that way, the market gets moved, but it doesn't need to cost the government anything in terms of real money."
He adds that the UK can also make better use of "out-of-the-box thinking" to push the uptake of low-carbon cars: "The UK needs to look at [initiatives such as] preferential parking, which people value very highly in terms of convenience, but don't create a huge drag on the Exchequer in the way that £5,000 grants for electric cars do."
The UK is on track to meet EU regulations limiting average car emissions to 130g/km by 2015 and 95g/km by 2021, according to official statistics. But, given the 31 per cent differential between lab performance and real-world driving, there remains a risk it could miss its national climate goals unless changes are made.
