Monday, December 10, 2007

What is the best way to tax cars?

Green Car Congress provides most of the information that this post is based on.

In the UK we have tax rates of around 70% on unleaded petrol. This is one reason that unleaded petrol costs £3.86 per gallon or $7.72 per gallon.

I would guess that Americans don't wish to pay this. The reason being that the US population are as proudly anti-tax as the French are proudly pro-tax, they also have an average fleet efficiency of 21-22mpg as compared to 34mpg in Europe as a whole.

It is curious to me that people will go out of there minds with rage if a govornment raises fuel taxes (therby paying for road infrastructure, health, education and essential services) and yet they dont seem to mind buying inneficienct SUV's or regular cars with inneficient engines. If you buy a car that does 40mpg rather than 20mpg that is the same in terms of your pocket as removing all fuel taxes at us levels.

However, given this political reality and the fact that people do cling quite stubournly to gas guzling vehicles is there a better way of incentivising efficient cars? Yes, there are many ways.

In France fuel prices are already relatively high but rather than increasing them futher they are moving to a freebate: freebates tax the polluting and use that money to pay the less-polluting. The system is revenue neutral and can be adjusted as technolgy advances or as policy strengthens.

In Ireland there is a sales tax on all new vehicles. This will now vary from 14-36% of the car's value depending on its carbon emissions. That is a significant up front cost. And people hate up front costs so for a relatively small amount of taxation a large effect is garanteed. Ireland also has annual road tax, which is also set to be linked to fuel efficiency; ranging from 100 to 2000 euros.

In the UK tax bands are currently diverging so that the range will move from £0-210 currently to £0-400 in 2009 the range, again, depending on carbon band of vehicle. Freebates, carbon-bands for insurance and for sales tax all have the disadvantage that they do not tax people who drive more, only cars that are less efficient. This makes them more alinged to changing the products that car manufacturers offer and less well designed to change driver behaviour.

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At 10:21 AM, Anonymous Anonymous said...

As usual, united-staters will find many excuses not to pay their part but that time is finished !
They have to start paying consequences of producing 25% of all CO2 on the planet with only 5% of the world's population.

You dont want to pay taxes? Drive less, buy fuel efficiency cars and deal with it !
Oil is getting to an end and this is the first start to make people change their habits, since nothing but the money works.

Its sad but its true.
So be it and I hope that this tax money, if its not a France-like way (neutral) will be used for ecological purposeses all around the world.

It wont make global warmign disapear, but it will push people to start change their habits, and therefore reduce the effects in the future.


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