posted 7 months ago

Punish Diesel Buyers With High Road Tax To Help Air Quality

Think Tank argues diesel scrappage scheme should be funded by higher, diesel only, road tax to help the environment.

Diesel vehicles more damaging than petrols

Drivers that buy new diesel-powered vehicles should be penalised via road tax as the fuel source is more environmentally damaging than most alternatives, a Think Tank claimed. But what is the justification, how might revised road tax work, and how likely might it be to make motorists favour the alternative power sources?

Environmental justification

Think Tank Policy Exchange said diesel vehicles are responsible for 70% of NOx emissions within London. The term “NOx” includes pollutants such as nitrogen dioxide (NO2), and nitrogen oxide (NO).

It concluded that 12.5% of London’s total area – which contains 3.8 million workers and 979 schools attended by a quarter of the capital's children - exceeded legal/healthy limits of NO2 in 2010. 

On this basis: “Encouraging motorists to switch from diesel towards lower emission alternatives such as petrol, hybrid, or electric cars would lead to a dramatic improvement in air pollution levels in the UK.” The Think Tank further argued that the motor industry has been slow to produce more eco-friendly vehicles. It commented:

diesel car tax

“Car manufacturers have systematically failed to control NOx emissions from diesel cars and vans, with recent evidence showing that diesel cars sold until 2014 perform no better, on average, than diesel cars sold in the 1990s (in terms of real-world NOx emissions).” 

It added: “Latest diesel cars show some improvement, but still exceed emissions standards by around 4 times on average.”

Air pollution's impact on public health

The Vehicle Certification Agency said that pollutants of this nature have an impact on public health, which added some credence to the Think Tank's arguments. It said: “NO reacts in the atmosphere to form nitrogen dioxide (NO2) which can have adverse effects on health; particularly among people with respiratory illness.” 

diesel car tax

“High levels of exposure have been linked with increased hospital admissions due to respiratory problems, while long-term exposure may affect lung function and increase the response to allergens in sensitive people.” 

How revised road tax system might operate

The Policy Exchange suggestion that motorists that choose diesel should be penalised via Vehicle Excise Duty (road tax) would be fairly simple to implement. As things stand, cars are placed into categories from A - M based on tailpipe carbon emissions (CO2). The lower the emissions, the lower the category and the lower the cost.

There is a pricing structure for petrol and diesel vehicles, then slightly cheaper rates for “alternatively” fuelled models. Clearly, the system encourages motorists to favour comparatively eco-friendly machines over gas-guzzlers. Furthermore, there are first year only “showroom tax” rates followed by subsequent annual rates. 

It is these first year rates that Policy Exchange said should be increased for diesels - by “up to £800” – to: “Reflect the higher levels of air pollution they cause compared to petrol cars”. If the Government implemented the recommendation, it would simply have to have separate first year rates for diesels, petrols and any others. 

Diesel vehicle scrappage scheme

The Think Tank claimed the increase would raise £500 million per-annum to pay for a diesel scrappage scheme. Motorists would then receive £2,000 when swapping old diesels – however low their value – towards the cost of newer, less polluting, alternatives. Half the money should come via the manufacturers, Policy Exchange suggested.

cars in congestion

Current diesel owners should not be penalised

Policy Exchange emphasised that existing diesel vehicle owners should not be penalised as they: “Bought their vehicles in good faith” often encouraged by favourable taxation terms. It explained:

“For the last 15 years, motorists have been encouraged to purchase diesel vehicles with Vehicle Excise Duty, Company Car Tax, and Capital Allowances all geared towards lower CO2 vehicles.” It added: “Consequently, diesel cars have increased from 14% of the car fleet in Great Britain in 2001, to 36% of the car fleet today.”

Government has to recognise diesels are problematic

Policy Exchange's Head of Environment and Energy, Richard Howard, explained: “If we are to clean up air pollution, then Government needs to recognise that diesel is the primary cause of the problem.” It then needs to: “Promote a shift to alternatives.”

Probability of success

Assuming diesels are, in fact, the “primary cause” of air pollution, it is reasonable to minimise their impact on the environment. Higher taxation could reduce their numbers, but there is no guarantee. Consider this: the Think Tank recommends that Excise Duty rates increase by “up to” £800 for the first year only.

This suggests only the most polluting cars such as expensive, high performance, models will incur the maximum charge. Motorists that can afford such machines are unlikely to be put-off by a further £800. Cheaper models might incur lesser penalties but, once again, even a few hundred pounds on the price of a new car is negligible. 

VW TDi diesel badge

So, whereas such a system could be launched viably its value is questionable – particularity as diesels cut costs by returning more miles per-gallon than petrols. In other words, even if extra tax is a factor buyers might conclude they can be reimbursed via the pump.

Perhaps of more definitive value is that any additional money raised via tax could fund a scrappage scheme. This would encourage those with old cars worth (say) £500 to claim £2,000 towards newer alternatives. Old diesel numbers would then fall; if there is no suspicion that manufacturer's recoup their costs by raising prices. 

An alternative is to effectively fine manufacturers for producing diesel-powered vehicles, but that cost would simply be passed to customers. As with road tax, buyers would calculate whether the extra initial expense can be recouped via the low refuelling costs.

Furthermore, motorists will soon increasingly favour zero emission electric cars irrespective of road tax. They can be charged via a plug for a fraction the cost of refuelling diesels, after all. That lifelong benefit will be the incentive to switch, rather than fearing a 1-off tax that might be recouped via savings at the pump.

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