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The Government has a published objective of having nearly all cars and vans in use on UK roads with zero tailpipe CO2 emissions by 2050. This means that nearly all new cars and vans sold in the UK will need to have that level of emissions by 2040.

The Government is consulting on plans to help to drive this change by manipulating the company car market in favour of zero emissions using taxation as the key mechanism.

History

Since 2009 the government has defined ultra low emissions vehicles (ULEVs) as those cars that emit less than 75g of CO2 per kilometre driven which also have a capability of covering at least 10 miles with zero emissions. This is now considered to be too polluting and with changes in technology a much lower emissions target is being sought.

Why company cars?

The market for company vehicles in the UK is substantial with around half of all new cars in the UK being purchased by companies. As a result influencing company car buying behaviour has a major impact on the supply of cars into the UK market as most company cars end up in the hands of private owners within 3 years.

How?

The chosen manipulation method is via the company car tax regime by offering lower rates of company car tax for cars with the lowest CO2 emissions ratings, as well as offering immediate write off of the full cost of the car against tax in the year of purchase for the least polluting vehicles.

Unfortunately this process has been hijacked by the increasing efficiency of petrol and diesel engines as manufactures strive to meet the EU target of 95g/km by 2021. This means that the push towards increasing ULEV use needs to focus not just on the CO2 levels but also on the emissions free range of the vehicles.

Problems

Unfortunately recent changes to the tax rate for ULEVs have not helped the governments cause as a vehicle in the lowest emissions band (<50g/km) in 2015/16 will see its tax charge increase by more than 3 times from 5% to 16% by 2019/20. This will mean that the tax bill for a car like a basic Nissan LEAF (fully electric with zero emissions) will go up from about £500 to £1,600 per year over that period, not an encouragement to dabble with the restrictions on that kind of technology especially when there is no way to reduce the tax payable by getting a car with lower emissions.

A comparison with a car like a basic Vauxhall Astra (with which the LEAF is often compared in size) would show the tax charge increasing from £780 to £1,320 over the same period and without the range issues always present with a pure electric car.

Clearly something else needs to change to encourage uptake and technological innovation.

Solutions

The key would appear to be to drive the development of more efficient batteries or perhaps different zero emissions technologies with the emphasis then being on raising the zero emission range of a vehicle. This should then cater for a market where the biggest drawback to increased take up of pure electric vehicle technology is the range limitation. Such achievements could then be rewarded with the lowest tax bands in such a way that ensures that the higher cost of the new technology does not create the sort of anomaly described above.

The reduction in CO2 emissions from our vehicles is going to continue to be pushed forward but it remains to be seen just how the government actually goes about the implementation process. Any comments or suggestions you may have can be fed back to me at Thomas Westcott and I can then incorporate them into my response to the consultation process.