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British Government Proposing Transportation Tax Measures to Tackle Climate Change

A pre-budget report by UK Finance Minister Gordon Brown proposes a series of tax measures designed, according to the report, to protect the environment and tackle the global challenges of climate change.

Among the measures proposed are an increase in passenger taxes for short-haul flights; an inflation-based increase in the road fuel tax; measures to promote the use of cleaner fuels, including support for the development of biofuels; an inflation-based increase in the climate change levy (energy tax) on business; and a time-limited stamp duty exemption for the vast majority of new zero-carbon homes.

Passengers on short-haul flights originating in the UK will see a doubling of the passenger duty rate from £5 to £10 for the lowest class of travel, and from £10 to £20 for other classes. The increase is scheduled for 1 February 2007.

Increases in the road fuel duty include: 1.25 pence per liter for liquid fuels (including biofuels); 1.81 pence per kg for natural gas; and 3.21 pence per kg for LPG.

On the biofuels side, the government announced that it would extend the 20 pence per liter (ppl) fuel duty differential to enable a pilot involving the use of biomass in conventional fuel production to go ahead. (The fuel duty tax for gasoline and diesel is 47.1 ppl; for biofuels, it is 27.1 ppl.)

The government also will amend the definition of biodiesel to include new second-generation biodiesel produced from biomass and is capable of being blended in excess of 5% blends.

The government said that it will consider the case for an incentive in company car tax to support the adoption of flex-fuel vehicles capable of using high-blend bioethanol E85.

Reaction from industry was fairly swift.

The Chancellor’s announcement of a 1.25 pence per litre fuel duty rise—the first in three years—is yet another revenue-raising exercise by the Government, which will hit industry and all road transport users.

It is also hugely disappointing that—once again—no financial incentives are to be made available to petrol retailers to invest in bio-fuels. This is vital if these new fuels are to be made readily available to consumers at UK forecourts.

—Ray Holloway, Director of the RMI Petrol Retailers Association (PRA)




I agree that this is pretty much a revenue raising exercise. The rise is not large enough to make much difference in fuel consumption.


To walk a mile, you've got to take one step at a time.

It's a small tax increase for individual consumers. For businesses which consume lots of fuel, it provides incremental incentive to make changes in business practices, as well as signals the government's willingness to continue to raise the fuel tax, thereby providing incentive to those making large capital purchases (like vehicles) to behave risk aversely and purchase a more fuel efficient vehicle.

It will help marginally, like every other change. Keep making changes, and you'll keep gaining improvements.


Generally speaking, I think these tax raising exercises are an extremely inefficient way to meet the stated objective --- to cut back on fuel consumption and, therefore, carbon emissions. U.K. probably has a higher eleasticity of demand for fuel than the U.S. but I suspect it still take quite a rise to make much of a dent in demand. Every little bit helps, but oh so little, that it is barely worth doing. It just pisses people off without having much of an impact.

It is almost like we are saying, "we will raise your taxes just an iddy bit, but not to worry, you're not really required to reduce your consumption unless you want to".

The truth is, those of us concerend about co2 emissions very much want people to cut their consumption and cut it in a big way. Instead of the truly massive and ruinous increased in taxes required, we need to be honest, up front, and just place caps on the available fuel through rationing. Whether or not you pay a higher price will then depend upon the sum of the higher market price plus the cost of any additiona l coupons required for those who consume above their ration. Those who consume little or nothing will profit from selling their coupons. Under this system, at least someone benefit, namely those who figure out a way to conserve.

In the U.K. though, there is an additonal problem. Public commuter transit is suffering from a serious case of undercapacity. So, any scheme to reduce consumption must be combined with a massive public works project to increase capacity of all parts of the system. Building more roads, like many people are demanding would be short sighted, expensive, and counterproductive.


t: I would think that North Americans have a lot more room to move on fuel usage than the Brits. I've managed in the last year to reduce my gas consumption to a quarter of what it was without any major reduction in lifestyle. I started telecommuting, my kids go to local schools (they walk), I only make one major shopping trip a week and I don't drive all over the place for my kids sports any more (that was a big stupid one). One major source of savings for N.A. would be to include more commercial space within our existing suburbs (a dirty word).


The probl;em is both sides have been keeping pet industries on life support for decades to keep the unions voting for them. The result is an assload of easy to topple industries and a buttload of union workers ans thier union dues and union wages all on the line.

I have friends in some of these industries and they ALL are prepared already for the day soon they move to maxico. So what they do often enough is raise taxes but also raise subsidies to keep the workers and thier votes around.

Harvey D.

stomv & t:

Agree with you. All individual and community efforts, small and large, can contribute positively to reduce energy waste, GHG and air pollution.

We will have to pay an extra 1.3 cents/Liter for fuel and gas into a 'Green Fund' starting 1st Jan 2007. This is less than many daily fuel price variations in the last few months and not too many people will object.

Another 1.3 cents/Liter (or more) every year would also be well accepted, specially when people see what is accomplished with the 'Green Fund'. We will see.

An important part of the latest electricity tariff increases is used to finance various electric energy conservation programs and it works.

We get a $20 rebate (= 30% to 50% of the average unit price) on the purchase and installation of every progammable thermostat (up to 7 ea.) The new 10-steps proportional electronic 200 VAC thermostats really keep the room themperature where you set it while keeping the radiator heat level relatively low, without zero or 100% levels. What a difference in comfort level vs the old mechanical thermostat and the early generation pragammable one. Energy savings on an electrically heated house can be as much as 30%.

The number of effective programmable thermostats installed since this program is in place have multiplied by 10+.

Another similar program is used to promote the purchase and installation of small floresrent bulbs (up to 15 ea. per house). That program is also having more success than anticipated.

Vermont State started similar programs 3 or 4 years ago and the results significant.


Although this is altogether a really small change, I think this is the way society eventually must go.

I.e. tax energy use, use of resources (doubly so for non-renewable or difficult to recycle stuff) etc., instead of income. Together with helping the environment, lower income taxes could help with unemployment which is a serious problem in most of Europe and many other places.

Thomas Pedersen

1.25 pence will do nothing for consumption but just put more money in the state budget. Such a small incremental increase in fuel price is absorbed with a mere shrug, although the political implications may be more severe. Significantly higher taxes are required to invoke real change in behaviour..!

Sad, but true. Price fluctuations on the order of 25 pence have failed to show any measurable impact here in Denmark.


__The US could stand to double, at least, the current federal gas tax. That way, taxes would fully fund the highway system. Currently, the Treasury Dept. is selling bonds to pay for operational costs, expansion and reconstruction of the system. Either we cut off muck of the expansion (often pork laden), to concentrate on rebuilding the system, or we will have to increase taxes and/or sell debt.
__A floor ($2.45 gal/reg.) and ceiling price ($9.95 gal/reg) would be helpful. Raise the floor, $0.25/year+core inflation (~1-3%), until in the ~$6.00 range, while raising the upper limit at core inflation rate. A similar system would apply for various grades of gasoline, diesel, and other fuels. The increases could be decreased/suspended during high inflation (>12%). Tax rebates for those who are adversely affected (poor, delivery service, construction, etc) by high fuel costs, and investment in more efficient equipment/technology/strategies. Have it planned put so that consumers will know what to expect. Overall, this would provide a carrot, and a stick for change.
__Later on, the additional tax revenues could allow some breathing room for the Feds to figure out how to solve projected deficits due to looming entitlement obligations.
__Exploit pork, in a way that funding for projects that do not create long lasting benefit for the country, could be shoveled at basic science, and technology. This would be a civilian version of DARPA, though objectives would not be as sensitive, or destructive. DOE, DARPA, other Govt. research branches, academic research, and the new agency could work together in some/similar areas, complementing each other’s work. It would do the groundwork for the advancements that you and I will benefit from in 10, 20, 30 years. Energy, nanotech, and biotech are three key areas for them to concentrate.
__The research facilities could straddle two or more adjacent Congressional districts, or be located in a neutral zone, with the neighboring districts permanently anchored near the site. It could be a deterrent to gerrymandering.


Its pretty obvious many governments are using fear over climate change to increase taxes. Sort of like water companies use fear of water shortages to jack up prices for consumers. While keeping all the increase as profits for themselves.

If the British government was serious about carbon emissions, they'd be putting in new nuclear plants and helping research avenues like PHEVs. Look just across the channel for how its done.

Mark R. W. Jr.

I just wonder how much more the Brits can take. Those Brit bureaucrats are fond of the "soak-the-motorist" approach. Why not just ban usage and ownership of all motor vehicles?

Rafael Seidl

Taxing the destruction of shared assets such as the local, regional and global environment makes a lot of sense if and only if you gradually, predictably and irreversably shift your tax base away from wealth creation.

The idea should not be to raise more revenue (a favorite among those social democrats honest enough to reject deficit spending) but to raise it differently. There is scant if any evidence that politicians really spend out money more wisely or efficiently than we do ourselves. Pols need to give very good reasons for any proposed net increase in the tax burden.


Dont rorget they have a comp;letely different tax setup there. They dont realy have to worry about this flushing the tax base out of london. If they had to deal with that like most places do london would likely already be a wasteland as its VERY doubetful the txes from inside london actauly fund all of its costs or even near.

A few other vities are that way and as the burden grows they face a very real likelyhood of revoking thier ability to gather funds from outside the city limits as other parts of the nation try to fund themsevles.


Good point Rafael a government could implement a tax on say gasoline to discouarge use.. While in the same bill including a tax cut in some other area equal to the expect tax receipts of the additional gas tax.


I personally feel the UK is approaching the issue of CO2 emissions from the wrong angle. The government seems to be trying to make a quick buck whilst pretending to be concerned for the environment. What they need to be doing is investing on biofuels, hydrogen technology research, improvements to the road infrastructure, etc.

It seems to be policy not to invest on road infrastructure when no alternative to the car exists. What the country has ended up is with jammed up roads, and overcrowded public transport. The daily commute for many car drivers consists of a lot of idling and not much moving, if new roads were built to move these traffic all of these cars would be polluting less. Same goes for buses, currently they are very slow to arrive to their destinations, if more roads were built and more buses put into service then they would be more competitive against the cars. And exactly the same goes for trains, more trains and cheaper are needed on busy routes.

The government seems happy with the transport crisis as it enables them to tax commuters. And the crisis only exists because of mismanagement, it is inexcusable that a country as rich and as undeveloped (other than telecoms the UK’s core infrastructure is ancient, uncompetitive, and inadequate.) as the UK is resisting further development, and putting its economy in peril.

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