New diesel tax would generate £500m and accelerate the switch to clean transport

New road tax implementations, aimed specifically at diesel vehicles, could generate more than £500m to fund a diesel car scrappage scheme that would ease manufacturing pressures associated with the consumer transition to electric vehicles, a think tank has claimed.

Policy Exchange has claimed that increasing first year road tax for diesel vehicles to £800 would inhibit demands and generate £500m annually – even if the new tax structure creates a 50% fall in diesel car purchases.

Ahead of next week’s Budget, the think tank recommends that the extra revenue stream should fund a scrappage scheme that provides funding for manufacturers who gear operational processes towards EV roll-outs and a £2,000 grant to motorists who scrap old diesel vehicles in exchange for low-emission models.

Policy Exchange’s head of environment and energy, Richard Howard said: “If we are to clean up air pollution, then Government needs to recognise that diesel is the primary cause of the problem, and to promote a shift to alternatives. This needs to be done in a way which does not unduly penalise existing diesel drivers, who bought their vehicle in good faith, and gives motorists sufficient time to respond.

“Instead of increasing diesel fuel duty or banning diesels from city centres, the government should look to increase taxes on new diesel cars and offer scrappage grants to take old polluting diesels off the road.”

With a major report on air quality scheduled for release later this month, Policy Exchange’s proposal – only applicable to new diesel models – would be the equivalent of increasing fuel duty by 1p per litre.

Over the last 15 years a variety of policy and tax enablers such as road tax and Capital Allowances have seen diesel car sales in Great Britain increase from 14% to 36%. Previous research from Policy Exchange has also suggested that these diesel vehicles are responsible for 70% of the Nitrogen Oxide emission in London.

Air of caution

Environmental law firm ClientEarth has sent a final legal warning to the Department of Environment, Food and Rural Affairs (Defra) informing the Department it will commence legal action if drastic improvements aren’t made to the UK’s ‘woeful’ approach to tackling air pollution.

Commenting on Policy Exchange’s propsal, ClientEarth lawyer, Alan Andrews said: “We welcome this recommendation from Policy Exchange. With tens of thousands of early deaths a year in the UK caused by air pollution, reducing traffic pollution – especially from diesel vehicles – must be a priority.

“This recommendation should go hand in hand with a national network of clean air zones that keeps the dirtiest diesel out of our polluted town and city centres unless car manufacturers can guarantee they meet the strictest emissions standards on the road.”

The UK is close to hitting a crisis point in regards to air pollution. London took just one week to breach annual air pollution limits and Defra has halved the amount of money given to local authorities in England to allow them to combat rising air pollution.

While this new proposal could provide timely relief to the UK’s ailing air pollution policies, the Environmental Industries Commission has warned that EVs are ‘too expensive’ to tackle air pollution alone.

Matt Mace

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