U.K. Introduces Carbon-Emissions Based “Road Tax”

April 1 saw the introduction in the U.K. of a Vehicle Excise Duty (VED) on all new vehicles sold, with rates based on CO2 emissions.

While the tax has been referred to variously as a Road Tax or Showroom Tax, it seems to fall clearly into the  carbon tax category.

According to one of the U.K.’s largest insurance providers, Staveley Head, the tax will be levied on all new cars during the first year of registration, with the cost increasing wit the level of CO2 emissions.

Cars emitting less than 130g CO2/km will not pay any VED at all for the first year, with rates of Pounds Sterling 110 for cars emitting 131-140g CO2/km and continuing up to Pounds Sterling 950 for cars emitting in excess of 255g CO2/km. The introductory rate of VED will be paid by the customer at the time of purchasing the vehicle and revert to the whatever current standard rate at the end of the first year.

Cars in the lowest band, which makes up 7.2% of the market, will see a reduction in VED of up to Pounds Sterling 120 on current rates in the first year, whereas at the top end of the market the introductory rate will equate to a Pounds Sterling 545 increase for the first year and a Pounds Sterling 30 increase for every subsequent year. Although only 1.5% of new car sales fall within this category.

Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT) said “We are disappointed that Government didn’t take the opportunity in last week’s budget to defer the introduction of the first year rate or the increase in standard VED rates. Environmental taxes need to be clear and consistent so that motorists can be confident that they will reap the benefits from their decision.”

A spokesman for Staveley Head, said “The motor manufacturing industry is in a very fragile state at the moment and we would therefore expect the Government to encourage people to buy a whole range of cars across the board. Not just on questionable environmental principles. Manufacturing and industry need a huge impetus in the next year if we are to have any hope of an early economic recovery. Surely a green issue like this, providing such a small benefit to the environment could be deferred for a year before we recommence saving the planet.”