Cutting emissions and making cars cheaper to run: a new approach to vehicle excise duty

Cutting emissions coverTim Leunig

October 2012

In this report, CentreForum argues that replacing vehicle excise duty with a one off emissions charge on new cars would cut 2.6 per cent off total UK carbon emissions after 15 years and lower running costs for motorists.

Under this 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.

The 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 its scheme will cut fuel use by around 450 gallons over a 100,000 mile lifetime, saving motorists around £2,700.

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"I welcome this report. It is exactly the sort of innovative thinking we have come to expect from CentreForum."
- Rt Hon Ed Davey MP, Secretary of State for Energy and Climate Change,

"This is a great proposal with strong rationale."
- Kate Barker, former chief economist at Ford Europe

"Worth consideration..."
- Roger Harrabin, BBC environment analyst