The stick and carrot are timeless means of encouraging people to change their habits and both are being deployed to convince drivers to go “green”. British Members of Parliament have been proposing a new stick measure, suggesting that the top rate of vehicle tax should rise for the highest emission vehicles, writes David Robertson.
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Their idea is to ramp taxes up to GBP1,800 per vehicle from the existing top rate of GBP210. This would appear to be an excessive use of the stick and, as most parents would agree, this is not always the best way to foster change. A bit of positive encouragement can work wonders. Unfortunately, the carrots currently available fall far short of what will be needed to force a change in consumer attitudes.
In the United States consumers receive a grant of US$3,150 when they buy a low-emission vehicle. The biggest selling “green” car at present is the Toyota Prius, which has become a must-have among the environmentally aware.
But this incentive, while generous from an American government, is about to run out for the Prius as it only applies to the first 60,000 vehicles sold for each particular model. Imposing this cut-off removes incentives just as the model is gaining traction in the wider market.
In Europe there are also incentives for going green with Norway offering drivers EUR6,000, Belgium EUR3,900, France EUR2,000 and Ireland EUR3,000.
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By GlobalDataMissing from this list is the UK. The British government wants 10% of new vehicles to emit less than 100 grams of carbon dioxide per kilometre by 2012 but it clearly believes massive tax hikes rather than incentives are the way to go.
Until last year the UK’s Energy Savings Trust, which is partly funded by the government, offered a GBP1,000 Power Shift grant for those buying hybrid and alternative fuel vehicles. This has now been scrapped.
The Mayor of London does offer some help by exempting cleaner vehicles from the congestion charge, which can save London-bound commuters up to GBP2,000 a year. The tax codes for company cars have also been altered so many fleets are moving to more fuel-efficient models. But for the vast majority of consumers there is now no up-front incentive to change.
Given that there can be a significant premium for buying a hybrid like the Prius, because of its duel electric-petrol engines, or significant hassle buying an alternative fuel car, due to a lack of pumping stations, it is not surprising that low-emission vehicles have yet to take off in the UK.
Richard Tarboton, head of the transport business unit at the Energy Saving Trust, said: “There needs to be strong financial signals from government that people should change to low emission vehicles.”
The Energy Savings Trust is proposing an alternative scheme that involves trading certificates. Auto manufacturers would gain credits for selling low-emission cars and lose them for selling higher emission cars. Every three months or so, the certificates attached to each vehicle (green for good, red for bad) would be tallied and any company with an excess of good credits could trade them with automakers with excess bad credits.
Tarboton said: “Vehicles that make more money for the car companies and for the dealers are the higher polluting types. This scheme encourages automakers to average their emissions across their fleets.”
If this sounds complicated and bureaucratic, it is. It sounds like a scheme dreamed up by an organisation looking to give itself something to do. It is so bureaucratic and unnecessary that it actually stands quite a good chance of being adopted by the government.
But in reality, consumers will change their buying behaviour without the application of stick or carrot by governments. Rising gas prices have already wrung massive improvements in fuel efficiency from existing models and for the vast majority of consumers it will be simple market economics – the cost of gas – that drives future vehicle acquisitions.
David Robertson
