Green tax puts extra £1,000 on family cars

The Times
Nov. 11, 2007

Families who choose to drive larger cars face an increase of up to £1,000 in the cost of motoring under a government plan to force people to switch to greener vehicles.

At the same time, manufacturers will be given incentives to accelerate the introduction of hybrid cars — which have a petrol engine and an electric motor — and those that run entirely on electricity.

The Times has learnt that the review of low-carbon cars, commissioned by the Government and due to report in February, will recommend a range of tough measures to reduce carbon dioxide emissions.

Drivers who choose high-emission vehicles, including family saloons, will face much higher excise duties and a purchase tax. But grants are likely for people who opt for cars powered by alternative fuels and choose vehicles that are fitted with devices that reduce fuel consumption.

Professor Julia King, the Vice-Chancellor of Aston University, who is leading the review, believes that cars powered by rechargeable electric batteries, rather than hydrogen fuel cells or biofuels, are the best option for reducing dependence on fossil fuels. She is preparing a set of bold recommendations aimed at reducing the amount of carbon dioxide that the average car emits per mile by at least 30 per cent within a decade.

Alistair Darling, the Chancellor, has asked her to complete the review in time to influence the budget in March.

Professor King told The Times that the Government would need to penalise drivers of high-emission cars as well as reduce the costs for those who invest in cars with low-emission technology: “We need both carrots and sticks. We are very focused on how we get results quickly. CO2 saved now is better than CO2 saved in 15 years time.

“In choosing cars, price is top of the list. Levels of increases of £1,000 to £1,500 seem to have a big effect on consumer behaviour. If there is a strong signal that there is only one direction we are going in — and that is lower CO2 — that will change behaviour. It’s got to be simple. The more complex it is, the more loopholes there will be.”

Professor King is considering measures such as a purchase tax on high-emission cars and an increase in the upper bands of vehicle excise duty. She said that she was particularly interested in influencing the purchase of company cars, which account for 55 per cent of new car sales.

“Linking company car tax to CO2 emissions has been very effective in changing behaviour. We could be encouraging companies to see car purchase as part of their CSR [corporate and social responsibility],” she said. Measures to encourage low-emission cars would have to be designed to ensure that the vehicles retained a high resale value to reassure purchasers. One option was to encourage companies to sell electric cars but lease the batteries.

Professor King acknowledged that the Government had to “consider what is palatable” and might find it politically difficult to accept all her recommendations.

“Sadly, I think it will be some pretty awful things happening in the rest of the world that will make us take some stronger decisions on climate change,” she said.

She was optimistic that recent developments in battery technology would allow a gradual shift to electric cars that could be plugged in and recharged overnight.

She was sceptical of the move towards biofuels made from crops as it was accelerating the destruction of rainforests and pushing up food prices. While 14 per cent of the world’s CO2 emissions come from transport, 18 per cent come from deforestation.

“In the long term we should not anticipate more than a small proportion of the UK’s car fuel coming from biofuels,” Professor King said.

She also expressed doubt about the use of hydrogen in cars, saying that it would be difficult to find efficient ways to produce and transport it. The process of producing hydrogen for use in fuel-cell cars resulted in up to 400 per cent more CO2 emissions than burning conventional fuels. “There is no point in having hydrogen until we have found a way of making it without high emissions,” she said.

The Government has already raised vehicle excise duty to £300 for cars in Band G which produce more than 225g/km of CO2. The Band G rate is due to increase to £400 next year.

Department for Transport research found that the differential between each band would have to be increased to £300 to persuade most drivers to switch to lower-emission cars. The differential between bands E and F, which account for the majority of larger cars, is now £40.

The RAC Foundation said that the review should consider the impact on families of any tax changes.

Edmund King, the foundation’s director, said: “Many families need larger cars and it would be unfair to penalise them. Big increases in road tax could also be counterproductive because it can be greener for a low-mileage driver to keep running a larger car than switch to a hybrid.

“Professor King should beware of knee-jerk price signals based on the green agenda. Any changes must take effect slowly. People cannot be expected to change their cars overnight.”

Cutting the carbon

Targets set by Professor Julia King for the average car’s carbon dioxide emissions:

Now 181g/km

2017 127g/km

2030 91g/km

2050 18g/km












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