#ICYMI - #CleanVehicles - Moving towards cleaner forms of transport

How tax policy can help drive down emissions

#CleanVehicles - A new report from @WPI_Economics, published today, explores how Government can use fiscal policy to encourage the uptake of cleaner vehicles and to meet its short-term, medium-term, and long-term environmental goals - while providing a shot in the arm for the UK's manufacturing sector.

To read the full report, please click here.

#CleanVehicles - The UK currently has illegal levels of NO2 in its air. Poor air quality is the single largest environmental risk to public health in the UK

Since 2010 the UK has had a legal obligation to comply with EU air quality standards.

#CleanVehicles - Only six of 43 zones across the country adhere to legal limits of pollutants, and polluted air leads to poor health and costs the country billions in productivity.

#CleanVehicles - Failing to act on air pollution will force families to live, work and play in areas that are dangerous to their health and miss a vital opportunity for UK industry

#CleanVehicles - Poor air quality leads to the equivalent of 40,000 premature deaths every year, and is estimated to have cost the UK economy £2.7bn in 2012 alone due to reduced productivity.

Then there's the cost to the NHS of increased respiratory problems and other health conditions exacerbated by air pollution. These effects are felt most by children, the elderly, and low-income families, who typically reside in high-pollution areas.

It's an issue the country cannot ignore - legally, morally, or financially. And tackling it means tackling the primary source of this pollution: the cars and vans that are driven every day on our roads.

Government needs to get clean vehicles on the road


#CleanVehicles - Ultra-low emission vehicles (ULEVs) made up only 1.4% of new car sales in 2016 - the UK fleet today is dominated by combustion engine vehicles.

This means that increasing the uptake of cleaner vehicles is a crucial part of cleaning up our air: 80% of roadside NO2 emissions come from road transport.

Government has committed to banning the sale of new fully petrol or diesel vehicles by 2040, but as this chart shows, achieving this will require a major change to the UK market.

This is not a change that can be achieved by tax policy alone - it will also need investment in charging infrastructure and technological developments such as increased battery life. But tax policy can play a crucial role in meeting three distinct but related Governmental aims:

1) In the short term, Government needs to meet legal limits of NO2 concentration levels;

2) In the medium term, Government needs to further drive the uptake of ultra-low emission vehicles (ULEVs), to set itself on the trajectory to meet its ambition of banning all sales of new petrol and diesel vehicles by no later than 2040; and

3) In the long term, it needs to both achieve the ban on the sale of traditional petrol or diesel cars and vans by no later than 2040, and respond to the decline in tax revenue that would occur if we moved tomorrow to an all-ULEV fleet.

Government is taking action - but there is scope to go further.


#CleanVehicles - Three quarters of people want to reduce the impact of their driving on the local environment.

Our polling showed that the general public supports the clean air agenda. 74% of people with an opinion agreed that they were interested in reducing the impact their driving has on the local environment. Our polling also found that 79% of people with an opinion agreed that Government should play an active role in encouraging the use of electric cars.

As well as its commitment to ending the sale of new 'fully' petrol or diesel vehicles by 2040, Government has taken other concrete steps, including investing in charging infrastructure. Since 2011, the plug-in car grant has also offered up to £4,500 off the cost of a new clean vehicle.

But the current system of motoring taxes can be significantly improved. 

How Government can meet its goals


#CleanVehicles - In the short term, we need mandated charging Clean Air Zones, with migitation for those least able to afford it.

In the immediate short run, Government needs to reduce air pollution levels in the worst-affected areas. The Government's own analysis suggests that the best way to do this is to introduce charging Clean Air Zones - and given the difficult local politics of implementing a new tax, we think Government should require local authorities to do so.

This would encourage people to get rid of higher-polluting vehicles - but there would also be some people who can't afford to replace their vehicle and have no choice but to enter a Clean Air Zone. So alongside this, we propose a scrappage or retrofitting scheme that applies to polluting vehicles, in areas with air quality problems, for small businesses or people on low incomes.

Combined, these measures would achieve tangible results of getting the most polluting cars off UK roads, as well as being fair.

#CleanVehicles - in the medium term, Government should replace the plug-in grant with a VAT rebate.

Getting on the path to achieving zero new combustion vehicles being sold by 2040 will need a lot more clean vehicles on the market.

The plug-in car grant reduces the cost of a cleaner vehicle by up to £4,500. Reducing the cost of clean vehicles is important: 84% of respondents to our survey said cost was the most important factor in choosing a car, but only 44% would be willing to pay more for a cleaner vehicle.

But our polling also highlighted flaws with the current scheme. Just 29% of respondents had heard of the plug-in car grant, and of those who had (and who had an opinion), 79% didn't think it offered a sufficient incentive.

By contrast, a VAT rebate would be both highly visible to consumers, and would be seen as more effective.

#CleanVehicles - Government should start planning now for the end of traditional motoring taxation.

If Government meets its target of no new solely combustion vehicles by 2040, it will find a big hole in its finances. Today, motoring taxation contributes around £36bn a year, but most of that only applies to combustion vehicles. 

This means Government will need to replace this revenue - and to do so without making cleaner vehicles less attractive.

The most likely candidates for this are road user charging and / or distance-based charging - but both of these would be a major shift in motoring taxation. So Government should start preparing for this now, and offer a prize fund for a City Region to trial alternative taxation systems.

It should also bring together stakeholders to begin consulting and building a consensus for a new scheme that not only raises revenue but has environmental impacts of vehicles at its heart.

#CleanVehicles Our proposals are bold, but necessary and pragmatic. 

They would help Government to meet their short, medium, and long-term environmental goals, and to do so while also protecting public finances and providing a much-needed shot in the arm to the UK's manufacturing sector.

To read the full report, please click here.