Think tank car tax plan would lead to big cut in emissions and lower costs for motorists

3 October 2012

Replacing vehicle excise duty with a one off emissions charge on new cars would cut 2.6 per cent off total UK carbon emissions and lower running costs for motorists, a new report by CentreForum argues.

Under the think tank's revenue neutral scheme, the government would set an annual emissions "pivot point" equal to the emissions of the best performing one per cent of cars the previous year. Cars with emissions below the one per cent level would receive a subsidy. Cars above this level would attract an emissions charge.

CentreForum says its scheme will give car manufacturers a big incentive to produce more efficient vehicles. This in turn will lower costs for motorists, who over time will see a reduction in their fuel costs.

CentreForum has calculated that the scheme will cut fuel use by around 450 gallons over a 100,000 mile lifetime, saving motorists around £2,700.

The scheme will reduce total UK carbon emissions by 2.6 per cent after 15 years, the report says.

Ed Davey, Secretary of State for Energy and Climate Change, said:

"I welcome this report. It is exactly the sort of innovative thinking we have come to expect from CentreForum."

Kate Barker, former chief economist at Ford Europe, said:

"This is a great proposal with strong rationale."

Report author Tim Leunig said:

"More efficient cars save motorists money and reduce global warming. What's not to like?"


The CentreForum report 'Cutting emissions and making cars cheaper to run: a new approach to vehicle excise duty' by Tim Leunig can be downloaded.

CentreForum's analysis is based on 61,000 lines of data on new car sales 2004-2007 kindly supplied by the Society of Motor Manufacturers and Traders Ltd (SMMT).