Will green car success influence incentives? The Green Piece
If every cloud has a silver lining, then apparently every silver lining has a cloud.
Just as the good news came in that average carbon dioxide (CO2) emissions from new cars in the UK had fallen by 5.4 per cent over the last 12 months (see article) representing the best year-on-year improvement since records began in 1997, rumours began to swirl that tax breaks for cleaner vehicles would have to be re-jigged.
Success story
The latest research from the Society of Motor Manufacturers and Traders (SMMT) revealed that average CO2 emissions for new cars stood at 149.5g/km last year. Even more encouragingly, the number of vehicles sold with emissions below the 120g/km threshold nearly doubled over the last 12 months from just 11 per cent in 2008 to 20.4 per cent in 2009.
Across the entire UK fleet of 30million cars, average CO2 emissions now stand at 175.1g/km. That is Europe’s third best net improvement since 2000.
Indeed the move towards green cars is noticeable across nearly all car sizes. Even the mini-car segment, which already produced vehicles with comparatively low emission levels, managed to make the best year-on-year segment improvement cutting CO2 emissions by 6.7 per cent. The luxury car segment, the most heavily polluting band, saw emissions fall by six per cent compared to 2008. Indeed cars with emissions in the range of 131-140g/km are now in the most popular band, down from the 151-160g/km sector last year.
What’s driving the success?
There are many reasons behind the drop in emissions including manufacturers pouring more money into producing more efficient engines. Simply put, cars are greener than they were two years ago and so it makes sense that emission levels should fall.
However, one of the key driving forces behind the change is government incentives, including emissions-linked vehicle excise duty and the scrappage incentive.
According to the SMMT, average CO2 emissions of cars bought through the scrappage scheme was 133.3g/km – that’s 26.8 per cent below the average emissions of vehicles being scrapped at 182.3g/km.
What does the future hold?
The scrappage scheme is about to end and with lower carbon cars generating substantially less vehicle excise duty than heavier polluting vehicles, fears are mounting that tax hikes may follow. Paul Everitt, the chief executive of the SMMT, commented that “people want greener cars and the market is responding by producing them… so either the Government will have to accept a lower income or it will end up shifting the CO2 thresholds.”
Indeed car tax is already scheduled for its first increase beginning in April with the introduction of the first year rate that doubles the level for the first 12months. Everitt believes that the time has come for the Government to sit down with the motoring industry and outline its future tax regime or else manufacturers will produce cars that customers will buy, only for them to fall on the wrong side of a revised CO2 threshold.
Thankfully, the Department of Transport has already announced that it will offer electric car buyers subsidies worth as much as 25 per cent of a car’s recommended retail price up to a value of £5,000, as part of a scheme that runs until 2014 suggesting there will be support for a new generation of green vehicles (see article).
Our verdict
It only makes sense that the CO2 tax bands will be adjusted over time. As cars become greener and produce fewer emissions, the incentives should follow. In fact it’s encouraging to think that in maybe 10-15 years vehicles with emissions in the 120g/km range may be considered among the largest polluters even though they are the green vehicles of today.
However, what’s important is that the Government doesn’t lose sight of its objectives and doesn’t pull the proverbial rug from under well-intentioned motorists before it has truly achieved its goals.
Despite encouraging signs, the UK’s average new CO2 level is still only the 10th greenest out of a European top 15. That suggests that there is still ground to be made up and any incentive adjustments should be carried out with forethought. It’s also important that the Government clearly outlines any adjustments significantly ahead of time so car buyers aren’t punished for what they thought were choices that would allow them to pay lower tax rates. Currently, we only know the tax regime for the next 12 months and if adjustments are planned they should be outlined as soon as possible.
The introduction of electric car incentives suggests that buyers will at least continue to be encouraged to make choices that are not only smart for their wallet, but smart for the environment too. However, until there is a large fleet of electric vehicles to choose from and suitable infrastructure in place to make driving these cars plausible for more than just a handful of motorists, the Government should continue to incentivise greener choices with regards to cars with combustion engines.
Faye Sunderland










