A scheme to tax cars based on their C02 output could have the unintended consequence of causing UK motorists to scrap tens of thousands of perfectly good cars in the UK, solely because their annual tax rates, based on C02 consumption, have become too expensive for many motorists.

The increase in tax rates would hit tax brackets L and M hardest – these are typically larger engine luxury, performance and off-road vehicles that emit 226 grams of C02 per 100 km or greater. For comparison, a Toyota Prius would qualify for the “A” band (under 100 grams) and is exempt from paying road tax. A Porsche 911 falls under the highest tariff “L” and “M” bands, depending on the model.

Owners of older vehicles that consume relatively more fuel and produce greater levels of C02 could be looking at annual tax rates that amount to as much as one third of their vehicle’s value. Motorists could be eager to dump these cars, further pushing down their residual values, leading to a situation where numerous vehicles in good working order are sent to the scrap heap for no other reason than high tax rates.

Just-Auto spoke to CAP, a vehicle valuation company, regarding the scenario

“We are now in the crazy situation where perfectly good cars have become uneconomical to own because the cost of taxing them could soon approach half their car’s value.

This means more and more cars will become unsalable and will have to be scrapped long before the end of their useful life. Scrapping serviceable cars for the sake of a tax disc makes a mockery of environmental taxes as owners already tend to limit their mileage because the cars are relatively uneconomical. 

Throw in the carbon footprint of building the cars that replace those that are scrapped and the environmental justification for taxing these cars off the road collapses. The government should now consider lowering VED [Vehicle Excise Duty] rates for cars that fall into the brackets L and M after a certain age. This would prevent this potential waste of vehicles that do relatively little harm to the environment but provide cheap and comfortable transport for thousands of hard-pressed motorists in austerity Britain.”

When government, media and industry agree that a trend exists, it’s generally taken as fait accompli. After all, these three institutions wield immense cultural power, and together they are more than capable of making any prophecy self-fulfilling. But there’s always a stumbling block: acceptance by the everyday folk who actually make up our society. And when a trend is taken for granted, the ensuing rush to be seen as being in touch with said trend often generates more heat than light. Such is the case with the trend towards “green cars.” Few would deny that they are “the future,” but at the same time, there’s been precious little examination of how this future is to be realized. And when such examination does take place, it tends to raise more questions than it answers.

Case in point: the Union of Concerned Scientists recently published a report examining just how “green” the “greenest” cars available, namely electric cars, are. By examining the average C02 emissions of the various regional power grids, they are able to show on a roughly apples-to-apples basis how carbon-efficient EVs are in comparison to their gasoline-sipping cousins. And their findings show that in broad swathes of the US, pure-electric cars are little better than hybrids like the Prius in terms of average C02 emissions.

This ACS report is something of a dual-edged sword. On the one hand, it makes an important point about EVs: that they are only as environmentally-friendly as the grid from which they draw their power. This fact has long been ignored by policymakers who take the “greenness” of EVs for granted and create uniform national EV stimulus, as if EVs were uniformly “green.” On the other hand, the ACS clearly has a pro-EV agenda, and its report concludes that

There are no areas of the country where electric vehicles have higher global warming emissions than the average new gasoline vehicle.

Given that EV offerings are currently limited to the Compact and Subcompact segments, this is hardly a fair comparison. And since the EPA includes cars like the Bentley Continental GTC as a “subcompact,” a fair comparison would take some real work. To be fair though, the UCS is correct when it points out that 45% of Americans live in the coastal regions where relatively clean grids offer strong environmental incentives for EV use. More importantly, those areas which have dirtier grids tend to be the same regions (the South and Midwest) where geography and development patterns create more practical disincentives for EV use. For this reason, the somewhat disappointing results of the study are unlikely to dramatically hurt the nascent EV market.

Still, this geographical distribution has important consequences for public policy. For one thing, it points out the futility of a nationwide EV incentive program, at least as an environmental policy. Luckily, this reality seems to have taken hold in D.C., where EV-only incentives are being broadened to include multiple fuels and encourage local solutions. On the other hand, the fact that EVs are a hot trend means local governments are often more anxious to show off their trend-awareness than craft sensible policy based on local realities.

For example, Colorado has one of the least “green” grids in the country, and yet its state government has been one of the most aggressive in handing out EV tax credits. Prior to 2010, Colorado allowed Tesla buyers to take up to $42,000 in credits. Today EVs get a $6,000 incentive in addition to the $7,500 (soon to be $10k) federal credit, and a local group has received half a million dollars in federal grants to promote EVs in the state. Given that Colorado-based EVs emit equivalent emissions to a 33 MPG combined gasoline car (think: Hyundai Elantra), this is proof that hopping on a PR-driven bandwagon often outweighs the actual benefits of such “environmental” policies.

But, in a profoundly ironic twist, Colorado may well become a leading market for EVs… and not just because of its generous government incentives either. In fact, Colorado’s relatively dirty grid actually makes it one of the cheaper states in which to operate an EV. In its cost analysis of individual cities, the UCS finds that Colorado Springs’ 2.4 cents-per-mile operating cost for a Nissan Leaf is one of the cheapest in the country, especially when compared to cities with the best emissions scores. Though there’s not enough evidence in this study to support a direct link between the cost and cleanliness of electrical grids, it’s no surprise to find that they do trade off with each other to some extent.

This is one of the key takeaways from the report for the simple reason that running cost, rather than pure environmental benefit, is what will drive the EV market beyond its early adopter niche. And as utilities invest in ever-greener powerplants in hopes of improving the environmental performance of EVs, running costs will rise. And as EVs become more popular, increased demand on the grid will further drive up prices. This tradeoff encapsulates the dilemma of all EV stimulus: the hoped-for environmental benefits are dependent on the mainstream economic viability of EVs, which in turn depends on cheaper (rather than cleaner) power and much, much cheaper EVs. The UCS report’s conclusion attempts to square this circle by pushing EV adoption as the overriding concern, noting

Of course, cleaning up the nation’s electricity production won’t deliver large reductions in the transportation sector’s emissions and oil consumption unless electric vehicles become a market success. While they are now coming onto the market in a much bigger way than ever before, EVs still face many hurdles, including higher up-front costs than gasoline vehicles. Lower fueling costs for EVs, however, provide an important incentive for purchasing them, and our cost analysis of 50 cities across the country shows that EV owners can start saving money immediately on fuel costs by using electricity in place of gasoline.

While this is true enough, it fully ignores how the market works. For one thing, the fuel savings touted in the report are in comparison to an “average gasoline compact vehicle,” and therefore fails to account for most of the market segments. Consumers buy cars that fill their needs, and many Americans need cars larger than a compact. Furthermore, though those savings are estimated to be as much as $1,220 per year (for a Nissan Leaf), these savings do not include amortization of the EV’s up-front cost premium. Consumers will see “immediate savings” on fuel costs, but will be far behind on total ownership cost for years.

Currently the EV market is truly a “green” market, as potential EV consumers are currently motivated by the desire to reduce their carbon emissions. But EVs simply won’t have much of an impact on national emissions until they offer the kind of “green” that actually motivates consumers: money, in the form of real savings. As long as federal and state governments focus, as the UCS has, on carbon emissions, EVs simply won’t find much of a market. If, as the UCS claims, reductions in transportation-sector C02 emissions require mass EV adoption as a prerequisite, the carbon question is currently little more than a distraction. Environmental benefits must give way to economic reality, lest all of the possible “green” benefits of EVs remain a permanent mirage.

Toyota and Fiat may not be setting European sales charts alight, but according to a recent analysis of per-vehicle CO2 output, the two automakers are on the cusp of meeting the EU’s stringent 2015 standard. Automakers competing in Europe will have to reduce their carbon emissions to 130 gm/km by 2015, a huge challenge for firms like BMW, Mercedes and Volkswagen, which currently have average emissions of 151, 167 and 153 grams per km respectively. Fiat and Toyota, on the other hand, have already reduced their emissions to 131 and 132 grams per km, putting them within a sneeze of the 2015 standard. But the auto industry never though that any of its firms would be on track for overcompliance. In fact, the AFP reports

In 2008 carmakers successfully pushed back from 2012 to 2015 the deadline for technological innovation, allowing them to meet stipulations, in exchange for a commitment to drop to 95 g/km by 2020.

Despite not insignificant loopholes, they can be heavily fined if they miss these targets as the EU strives to meet wider aims in reducing emissions of harmful gases blamed for negative climate change effects.