Gustav Hoejmark-Jensen

Carrot or stick for the future of green transport in the UK?

The UK is days away from a general election in which the climate has taken centre stage. Manifestos are full of promises and TV debates feature melting ice sculptures.

11 years ago, the UK committed to an ambitious goal of zero emissions in 2050. But when it comes to the transport sector, current economic policy seems out of touch with that commitment.

By Gustav Hoejmark-Jensen

The most important area for a future government to focus on in terms of the climate is the British transport sector.

It generates 23% of the UK's total carbon emissions, which is more than any other sector in the UK according the governmental advisory group, the Committee on Climate Change (CCC).

Tackling the transition from petrol and diesel cars, to electric cars could very well be the solution.

But there are still several political potholes that need to be paved by the next government, if it is to put Britain on the road to a carbon free future.

The first speed bump is the price barrier. Electric cars are simply more expensive than regular cars and they often come with the extra cost of installing a charging point at home.

Previously, the Conservative Government tried to lower these costs through grant schemes, but in November last year, the Department for Transport (DfT) reduced the grant on fully electric cars significantly, dropping it from £4500 to £3500.

The DfT also completely scrapped the grant on electrically assisted, hybrid cars.

Reports from the DfT suggests that this was done as the grants reached a “government cap”, and to provide more funding for public charge points, but the department declined to comment further, pending the election.

The latest figures from the DfT show that there were almost 32,5 million registered cars in the UK in 2018. But only 1,8% of them were electric.

This ties in with the latest CCC report from May 2019, that showed how only around 2% of all new cars sold in the UK in the 12 months to September 2018 were electric.

This is a long way from what PM Boris Johnson said in his first speech on the 25th of July this year, “We will be the home of electric vehicles – cars, even planes, powered by British made battery technology being developed right here, right now.”

It seems especially far from the target when compared to the UK’s Scandinavian neighbours as 47,5% of all new vehicles sold in Norway in 2018 were plug-in or fully electric cars.

In Sweden, electric cars accounted for 7.5% of all new cars sold.

The CCC attributes the high percentages of sales to the strong support by the national governments who provided tax-exemptions and other incentives.

In Norway for example, electric and plug-in hybrids are exempt from all road, income and export tax, and they even enjoy free parking in cities and no road-toll.

Popularity is rising but incentives are needed

The popularity of electric cars in the UK is generally rising according to figures from the Society of Motor Manufacturers and Traders (SMMT).

But as little as 0,5% of all miles driven in the UK were done in low-carbon vehicles in 2018 according to the CCC.

Estelle Symonds, the co-owner of EV Experts, an electric car dealership, believes that the Government is providing the wrong and too few incentives.

“The Government should do a whole lot more to incentivise people to go electric. I think that electric cars should be exempt from all road tax. Already, electric vehicles are more expensive in the first place, and a number of electric vehicles are being taxed even higher now. People definitely distance themselves from cars in the high tax bracket.”

Representing the manufacturing and car trade industry, Mike Hawes, the Chief Executive of SMMT agreed to an extend and said: “The industry shares the Government’s ambition for a zero-emission future but while manufacturers continue to invest billions in the technology that will get us there, they cannot determine the pace of uptake. We need a world-class package of measures, with heavy investment in infrastructure and long-term purchase incentives. This should include a fair and fiscally neutral tax system that encourages car buyers to choose the right low- or zero- emission vehicle for their driving needs.”

Stick over carrot

In the past, the UK Government could influence the driving patterns and car purchases of the public by adjusting the tax on petrol and diesel. A higher fuel tax meant less driving and that more economic cars were bought, whereas lower fuel tax led to the opposite.

But since 2000, the fuel tax has been locked at 57,95p per litre, according to the Government’s website for taxes and duties.

In fact, Boris Johnson announced before the election that he would reduce the fuel tax by 2p per litre in the next budget.

A decision that would not only cost the Government £1bn a year, but also greatly reduce the incentive for people to buy low-carbon vehicles, according to the Institute for Fiscal Studies (IFS).

Further calculations by the IFS indicate that the UK Government has already lost out on “£19bn since 2000”, and it stands to lose another £28bn if fuel duties are not raised in the next budget.”

In recent years, revenue from fuel duties have been falling due to a prolonged freeze.

A rise in fuel duties would incentivise the move to lower emissions cars, and this may well be one of the tools that a future government could use to achieve lower emissions.says Rebekah Stroud, a research economist at the IFS.

Regardless of whether it is higher fuel duties or grants and tax-exemptions, the importance of sustainable transport is central to the climate debate and in the general election.

And whether the UK’s goal to reach zero emissions will be reached with the carrot or the stick depends on the 12th of December and the new government.