GreenFleet

If your car emits more than 160 g/kg you get a lower writing down allowance than less polluting cars. Then there are extra CO2 rules for leasing and renting.

Not stopping there, why not make vehicle excise duty more complicated? Add bands for different size engines then change that to having bands for CO2 emissions. That’s too easy, so have different rates for different age vehicles and then have different rates again for the first year from other years.
    
Then there are benefits in kind – yet another matrix of taxes with more changes coming. And don’t get me started on grants for LPG conversion – here today, gone tomorrow – or grants for public service operators or farmers’ fuel.
    
Well okay, these taxes have had an effect – and in the right direction. Fleets have definitely reduced CO2 emissions more than private sales. But has this been good for the country?
    
These taxes deal with the purchase of a car, but that is only one part of transport’s impact. The others are: how well that car is driven (and serviced); how good the choice of using the car is (should we go by rail?); and, how many drivers there are.

Other sources of carbon
There is a much bigger picture than transport. Road vehicles produce around 25 per cent of Britain’s CO2 but pay over 90 per cent of “carbon” taxes. The Stern report for the national government, The Economics of Climate Change, stated that if we paid £50 for each ton of CO2 equivalent produced we should be able to reduce our emissions to a sustainable level. He has since revised this sun upward to around £80. However, motorists already pay over £143 a ton.
    
We need to make life simpler and we need to reduce our impact on the environment in the most cost effective way.
    
That means whatever else we do in this country we need to introduce a carbon tax. Okay, carbon tax should be considered the last policy tool we use and not the first. Other policy tools, such as education, persuasion, regulation, cap and trade, and targets, can provide reductions but a carbon tax, which only increases if we are not meeting our target of an 80 per cent reduction by 2050, tells industry and the public at large that the government means business.
    
The beauty of the carbon tax is that it would encourage reductions in the easiest areas first – so transport, as the hardest area to be dealt with, would be dealt with last.

Tax rates
How should the rate be set? In my view the best way of setting the rate is to form a Carbon Tax Commission charged with a single brief to set a rate that will enable us to reach our target on time. This would be rather like the way that the Bank of England sets the interest rate.
    
This rate would be set five years in advance. When the ETA first suggested a carbon tax nearly two decades ago we felt a £1 tax would be the initial rate. We wanted the tax to be introduced very gently. So that people got used to it before it began to bite. However, sadly, today we would recommend a figure not lower than £10 a ton of CO2. Even so I dare say the commission would have to increase the rate significantly in the fifth year and beyond.
    
As taxes go, the logistics of collecting the tax would be easy. Most of the tax would be levied on the fossil fuel producers at the point the fuel arrives on the surface if produced in this country or on the importers at the coast when the fuel arrives. I say most because there are a number of other contributors to climate change gases and the Carbon Tax Commission would have to evaluate the need to tax other sources – even cattle produce climate change gases – and the method by which the tax should be collected.
    
Some people say that the carbon tax should be hypothecated – in other words allocated to specific spending like public transport, insulating roofs, renewal technology research etc but although I see the reason for doing so – to ensure public support – I think carbon tax should just go straight to the national Treasury. It is up to the political parties to decide whether other taxes should be lowered as a consequence. For my part, I think other taxes should be lowered as carbon tax kicks in. The first taxes to be lowered would be those that are currently regarded as applying to climate change gases such as aircraft tax and fuel duty but later on other taxes could be reduced.

Driving down costs
At the moment producing electricity from coal costs around 3p a kilowatt per hour (3p/kW/h). This is cheaper than burning natural gas or oil and that is why most power stations still use coal to generate electricity. Renewables cannot produce electricity this cheaply as electricity from wind turbines costs 4p/kW/h and the latest solar technology also costs 4p/kW/h.
    
Once the Carbon Tax Commission sets its rate for a carbon tax, however, the cost of producing electricity from coal-fired power stations would cost more than renewables. From that moment on almost all new power stations in this country would be wind or solar based.
    
The nature of the national grid would change from the current hub and spokes system to a peer-to-peer network system. This would radically reduce the cost of power supply. This in turn would enable cars to run on electricity (currently if all cars ran on electricity the national grid could not cope). This could allow cities, should they have a wish to do so, to ban all vehicles that were not zero emission from all or part of their cities.
    
So get rid of VED, get rid of Fuel Duty, get rid of WDA, add VAT on all transport and make life simpler. Introduce a carbon tax and businesses will be able to focus once again on the bottom line and know that CO2 has already been taken care of.