ACEA

Consistent Taxation

CO2-based fiscal instruments - supporting markets for the cleanest vehicles

The automobile industry recognises the role vehicle taxes play in driving down CO2 emissions from road transport. As part of an integrated approach, clear and consistent tax signals send a strong message to consumers, industry and other stakeholders.

However, the current framework across member states is not supportive with a disparate and fragmented approach. Registration taxes are a particular issue, varying widely across borders, distorting the internal market and penalising fleet renewal.

Harmonised CO2-based taxes, based on use rather than ownership, should be the goal. This would maintain the integrity of the market while encouraging responsible use rather than penalizing buyers who choose the latest generation of low emission vehicles.

The European automobile industry recognises the role fiscal instruments play in supporting the market for cleaner vehicles and driving down CO2 emissions from road transport.

Tax incentives encourage motorists to consider the environmental impact of vehicle choices and to use vehicles responsibly; they encourage commercial vehicle operators to specify newest models with the latest pollution abatement technology and they can drive the market for cleaner, alternative fuels.

However, the environmental benefits tax systems bring depend on clear policy and a harmonised approach. Today, there is still huge variation in both the basis for taxation and tax levels across the European Union. This damages industry competitiveness and reduces progress towards environmental goals.

For example, different member states tax cars on power, price, weight, cylinder capacity or a combination of these measures, forcing manufacturers to adapt vehicles to match tax structures in individual member states.

Economies of scale are reduced, harming competitiveness and leading to higher priced vehicles. The internal market is inefficient and consumers face a confusing array of different tax regimes across borders.

Registration taxes

European auto makers have called for the abolition of car registration taxes which are still widely applied in different member states. Recently, some governments have even considered introducing new registration taxes. This is an unwelcome development as, generally, registration taxes threaten fleet renewal. In most cases, they provide a disincentive to replace older, more polluting cars with those emitting less CO2 and significantly fewer air pollutants from the tailpipe.

Fiscal income from motor vehicles (click on picture for higher resolution)

Auto makers support the replacement of registration taxes with a harmonized system across the EU. This should be based on vehicle use and framed around standards reflecting the impact that different types of vehicles have on the environment. This would provide a clear signal. Private motorists and commercial vehicle operators who choose the most environmentally-friendly vehicles would be rewarded for responsible use, encouraging fleet renewal while supporting lower CO2 goals and air quality improvement targets.

Harmonised car CO2 taxes

The Commission has proposed to link car taxation partly to vehicles’ CO2 emissions, recognising the role this can play in reducing CO2 from road transport. Auto makers support this approach. CO2-based taxes for cars provide economic incentives to which consumers, manufacturers and fuel suppliers will respond.

Seventeen member states levy CO2-related taxation on cars

In the past 18 months, France, Spain, Finland, Ireland, Romania and Malta introduced CO2-related car taxation. With Germany set to follow suit, this will bring the total number of member states with such systems to seventeen.

The European car industry welcomes the trend towards CO2-related car taxation but has also warned that failure to harmonise tax systems weakens the environmental benefits this approach may bring. A harmonised CO2-based tax regime for cars should be a priority. It would maximize emission reductions, support manufacturers and maintain the integrity of the single market.

Key points

• CO2-efficiency should be made the key criterion for car taxation
• CO2-based taxes should be linear and every gramme should count
• All taxes must be technology-neutral to allow competition to develop low-CO2 solutions
• Tax revisions should be budget neutral

Excise duties on fuels (click on picture for higher resolution)

More information

• CO2 dossier
• Trend towards CO2 related taxation continues
• CO2-related taxation is a must
• Incentives for buying electric vehicles

last updated 06/10/2009

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