TEPR projects: Taxes and incentives

Taxation and incentives can be used to improve the environmental performance of transport in many different ways. In the UK, a car’s first year road tax (also known as vehicle excise duty or VED) and company car tax (also known as the company car benefit in kind scale charge) are based on a car’s CO2 emissions. This aims to encourage the purchase and use of low emission cars.

Grants can be made available to those who buy new, clean vehicles, if these are more expensive than comparable petrol or diesel vehicles. Fuel taxes can also be differentiated to encourage the supply and use of cleaner fuels.

TEPR has worked on various reports on the use of taxes and incentives to encourage low carbon and cleaner transport:

• Fiscal instruments for low carbon transport, which was undertaken with TEPR Associate Malcolm Fergusson for the Low Carbon Vehicle Partnership (LowCVP). It involved a policy analysis and a quantitative assessment of the different future taxation scenarios.
• Consideration of the impact of car and van scrappage schemes, which included a literature review and a quantitative assessment of the parameters under which a scrappage scheme might be successful in delivering reductions in CO2 emissions for cars and vans.

TEPR has also worked on the effects of legislation on car prices:

• Effect of regulations and standards on vehicle prices, which included a literature review and modelling to identify whether it was possible to identify the extent to which regulations and standards affect the prices of new cars. Further information was in the report’s Annex.

Previously Ian Skinner of TEPR has worked on the following relevant reports:

• The environmental impact of company car taxation, which was undertaken for the European Commission and also involved Malcolm Fergusson. The report was based on a literature review and policy analysis covering a number of EU countries.
• EU – Fuel and Vehicle Tax Policy, which was undertaken for the Swedish Environmental Protection Agency and involved a literature review, quantitative assessment and policy analysis.
• Using the market for cost-effective environmental policy: Market-based instruments in Europe, which was undertaken for the European Environment Agency (EEA). Ian Skinner drafted the chapter on transport.
• Road Pricing and the Environment, which was a Briefing Paper produced by IEEP for Transport 2000.
• Transport Taxation and Equity, which was undertaken with Malcolm Fergusson for the Institute for Public Policy Research (IPPR).
• Winners and Losers: Company Car Tax Reform, which was undertaken with Malcolm Fergusson for the Transport 2000 Trust.