CO2-based registration taxes have strong influence on market - report

A recent report from the Brussels-based NGO, Transport and Environment (T&E) finds that countries with the lowest CO2 emissions from new cars usually have registration and company car taxes which are strongly graduated according to those emissions. 

 

The report - How Clean are Europe’s Cars? -  found that the Netherlands had the lowest CO2 emissions from new cars of all 28 EU member states in 2013 at 109 g/km. The country saw the second best overall reduction, 30.4%, since the EU introduced binding CO2 limits for new cars in 2008. The Netherlands’ car registration tax is steeply differentiated by fuel economy while it has exemptions from circulation tax for very low-carbon vehicles including electric cars.

 

It also strongly differentiates against CO2 emissions in the taxation of ‘benefit in kind’ payments for company cars to incentivise the purchase of the lowest-emitting vehicles.

 

Germany, the largest European car market, was by far the worst performer of the EU’s 15 longest participating member states with 136.1 g/km. It has no significant registration tax and annual circulation taxes are so weakly graduated according to CO2 emissions as to have little effect on consumer choice.

 

The report says that company cars in Germany are hugely subsidised with a benefit-in-kind payment of 12% of the car price per year, not differentiated by CO2. 

 

However, car taxes graduated according to CO2 emissions have sharply increased the share of diesel cars, which typically have around 15% lower tailpipe CO2 emissions than petrol cars but are considered to be a major cause of pollution in urban areas.