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UK to Raise Taxes on Least-Efficient Cars; Other Budget Initiatives to Tackle Climate Change

22 March 2007

The UK Budget 2007 introduced by Chancellor Gordon Brown will almost double the vehicle excise duty (VED) on the least fuel-efficient cars, raising the rate for VED Band G to £300 (US$591) in 2007-08 and £400 (US$788) in 2008-09.

For taxation purposes, the UK groups vehicles in bands defined by a range of CO2 emissions. Band G vehicles emit 226 g CO2/km or more—equivalent to about 9.4 l/100km fuel consumption (25 mpg US) for a gasoline vehicle or 8.5 l/100km (28 mpg US) for a diesel.

In counterpoint, the rate for low-carbon band B cars (101-120 g/km) is reduced to £35. Rates in the graduated bands C-E will increase by £5 in each of the next three years; and the rate for band F will increase by £10 in 2007-08, then £5 in each of the subsequent two years.

The current differential in the rate for gasoline and diesel cars will be aligned, as the differences in nitrogen oxides and particulate matter emissions for new cars is expected to fall to close to zero under Euro V and VI emission standards.

Other efficiency-related and lower-carbon initiatives in the Budget include:

  • An increase of 2 pence per liter (2 ppl is roughly equivalent to $0.15/gallon US) in main fuel duty rates this year, deferred until 1st October 2007; with increases of 2 ppl in 2008-09 and 1.84 ppl in 2009-10;

  • Extending the current 20 ppl duty differential for biofuels to 2009-10;

  • Maintaining the current duty incentive for biogas until 2011-12 (an extension of two years);

  • Moving forward with the proposed Enhanced Capital Allowance for the cleanest biofuels plant and introducing a payable enhanced capital allowance for companies not in taxable profit to ensure that both profit making and loss making firms have an incentive to invest in the cleanest biofuels plant; and

  • Instituting a 2% company car tax discount for E85 company cars from April 2008.

The Chancellor also asked Professor Julia King, Vice-Chancellor of Aston University and former Director of Advanced Engineering at Rolls Royce, working with Sir Nicholas Stern (of the Stern report), to lead a review to examine the vehicle and fuel technologies which over the next 25 years could help to decarbonize road transport, particularly cars. The Secretary of State for Transport will set out the Terms of Reference for the review shortly.

Transport accounts for a quarter of emissions: our objective for Britain is the lowest carbon cars using the least polluting fuels. Average new car emissions are today around 167 grams of carbon dioxide per kilometer. A medium term objective is 100 grams. We want Britain to lead in developing the next generation of low and no carbon vehicles and fuels.

—Chancellor Gordon Brown

Additionally, the UK will launch a competition to develop the UK’s first full-scale demonstration of carbon capture and storage, the result of which will be announced next year.

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March 22, 2007 in Climate Change, Europe, Fuel Efficiency, Policy | Permalink | Comments (15) | TrackBack (0)

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Comments

We should do the same here in the US of A!!!

Tell that to the Reps...hahahaha!

FS

Heneraly taces of any kindother then against drunkards and smokers are greeeted as warming as a transvestite ace murdering child rapist puromaniacaltelemarketing lawyer wearing full kkk whites and toting a rocket launcher.

I'm confused...I tried to read Wintermane's comment and now I just have a headache.

Well least I manged something today;/

It is intarsating thit in Eglinsh lunfuoge, if you raed fsat, the morst improratunt to unsedrstadning awre the firist amd tfe luast latutrs of tue worud.

I like "feebates". If people want to drive fuel inefficient cars, they should have to pay more than they do at the pump. In the aggregate, they are using more than their fair share for transportation and causing shortages and higher prices for everyone else. If I want a $40k gas guzzler, I may have to pay $50k and the other $10k goes to 5 people at $2k each to buy more sensible and fuel efficient cars to offset the recklessness and irresponsibility of the guzzler buyer.

SJC,

Freebates --that's an interesting observation. I bought a Geo Prizm in 1996 (and still have it). The dealer was blowing them out at $4k below the sticker price. Markups for small cars aren't that big, so they were losing money on the cars.

Upon investigation it turned out that GM couldn't make Suburbans and Tahoes fast enough. The dealer could get more SUVs if they sold more small cars. They more than made up the loss by selling the SUVs.

Personally I prefer a higher gas tax, but raising CAFE (without separate categories for cars and light trucks) could have the same effect as the shortage did 11 years ago. Dealers would have to give away the small cars to earn the right to sell the SUV. People could still choose the larger vehicle if they wanted, but it would cost them.

Of course the auto lobby (Big 3 + UAW) would fight it, but politically it would be easier than a higher federal gas tax. A large part of the US energy problem in the transportation sector is caused by the lack of competitiveness of our domestic auto industry. Until that is addressed we won't be able to advance any effective policy changes. It would take a very strong politician to stand up to them.

Andrey, the first letters are incorrect in some of his [wintermane's] words AND some of the incorrect spellings ARE real words which makes it even more difficult to discern the content.

Can I understand what he wrote? Generally, yes...but it takes some time and going back to the beginning again after obtaining context clues from the other parts of the comment. I have to be really bored to spend that much time on understanding one comment. It took a little extra work to understand that he meant "axe" instead of "ace" (the c and x keys are next to eachother), "taxes" which at first I was wondering if he meant "traces", "races"...or any other words with close by keys on the keyboard that may possibly fit in the sentence. Like I said, quite a bit of work...luckily I'm ahead of schedule and bored right now.

BTW, Wintermane, I believe there is software which could convert speech into print and vice versa. I believe it could help. Anyone?

Patrick, if you are bored take a look at this one. Kind of interesting:

http://www.stanford.edu/group/efmh/fossil/ClimRespUpdJGR%201.pdf

Wintermane's unintentional imitation of Jackson Pollock re-arranging the English language aside, this UK budget is a step in the right direction, except for two things:

a) the new VED rates do not differentiate between those who own a large station wagon, minivan or similar vehicle because they have a large family and those who purchase SUVs and sports cars just because they like them and have money to burn. It would be counter-productive to operate two smaller vehicles just to get all the kids to school. Ergo, the number of dependents should be taken into account, e.g. via more generous income tax deductions.

b) the UK, like most European countries, already levies high taxes. Addressing CO2 emissions/energy supply risk via tax hikes over a number of years is a good idea if and only if other taxes (e.g. personal income) are reduced to compensate. The objective should be to modify consumer behavior over time, not to increase the already high share of GDP that passes through the rather inefficient public purse. Then again, Brown is a Labour politician.

Well in most places I simply come back a day later and reread what I have typoed;/ Edit the swapped letters and go on. I have a combo of bad eyes extreme dyslecia and touch typing fingers that randomly spell words different ways sometimes in the same sentemce.

Anyway unless europe curbs tourism both internal and external and goes into a titanic mass transit binge to handle all the new places being built its all moot. And this tax will also hit the poor and such harder then any other group as they have the oldest cars.

Now lets see how screwed up my typing was this time!

Wintermane, it is clarity of thinking which matters, not clarity of printing.

Well I guess thats ok.. sept im also kinda a tax INSANE:)

Anyway I think the main problem for europe is they simply dont have time. Global warming man made and otherwise will hose europe far before it hoses china or the us and as such both china and the us can and are taking a conservative plan. Both can afford to suffer more global warming effects then europe can both can secure and create more alternative fuels then europe can and both are far morr powerful then europe is.

In essese they can use europe as a ginnie pig.

Combining what europe HAS to come up with early and avoiding what europe has to screw up becayse they are first the us and china can add in what they have time to slowly create and buy what europe actauly managed to get right and cheaply leapfrog europe as europe goes to hell in a handbasket when global warming realy hits the fan.

wintermane said: "this tax will also hit the poor and such harder then any other group as they have the oldest cars."

Good point and reinforcement for "feebates." But how to distribute the income? One alternative: an escroe account for oil wars and aftermath management thereof.

Its interesting to read all these comments as a British person. The "feebate" idea has been tried - "offsetting". If you save carbon in one area, its OK to create it somewhere else. It didn't work. What upsets me the most is this view that Europe has to come up with a solution while the two most polluting countries in the world can take a "conservative" plan! COMPLETE RUBBISH. Global warming effects us all now and we all have to do something about it now. Wake up America & China! Join in with the rest of the planet and make a difference. Even those with dyslexia.

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