Emissions tax little more than spin

While South Africans buying new cars as from September this year will be hit by the stick of an additional “emissions tax” of R75 per g/km carbon dioxide for each g/km above 120 g/km, France recently has taken a big step back from emissions tax to protect the competitiveness of French manufacturers. Britain has taken a completely different route as countries struggle to balance pressures for environmentally friendly policies and domestic economic and political needs and pressures.

French President Nicolas Sarkozy last week announced that he is abolishing plans for a tax on carbon emissions as part of his reform agenda, while he grapples with social unrest and a crushing election defeat. The tax originally was hailed as a major weapon in the fight against climate change, but the French government had to backtrack on the idea after the country’s highest court struck down the bill implementing it, insisting it had too many loopholes for industrial polluters.

Probably more importantly, in the wake of a crushing defeat in regional elections on 21 March, the government was becoming worried about the impact of a carbon tax on the French economy. Ministers and members of the governing UMP party said the tax would put French companies at a disadvantage to their European neighbours, most of which do not have anything similar in place.

In a move, probably motivated by similar factors to those that forced France into reverse on the emissions issue, Britain has chosen the carrot approach rather than the stick of punitive taxes.

Ultra-low carbon cars will have their company car tax halved for five years as part of proposals outlined by Chancellor of the Exchequer Alastair Darling in this year's Budget.
Cars that emit between 1 and 75g of carbon dioxide per kilometre will see the 50% drop in the percentage of list price subject to company car tax.

In December’s pre-Budget report, Darling announced that zero-carbon vehicles would be exempt from company car tax for five years, and now ultra low-carbon will make tax savings.

Only time will tell whether it will amount to much more than kissing one's sister. Fact is that currently, there are no cars on sale in the United Kingdom with carbon emissions below 88g per km. The chancellor, however, in a case of stretched logic, is hoping that halving the company car tax rate would make manufacturers work more quickly to develop a car with emissions below 75g per km.

It remains to be seen if any manufacturers would commit to the research and development spend to develop such cars/engines without the push of existing competition in such a segment in the market. It is likely to be a long and slow process before market pull factors come into play.

For now, it would seem that the announced measures adds up to little more than lip service and spin on the issue of pollution and climate change.

In South Africa, the real reasons for the introduction of an emissions tax have been called into doubt. While technology to reduce fuel usage and emissions are available to most South African automotive manufacturers, it cannot be employed in South African cars because of the poor quality of fuel available in the country.

It is against this background that Mercedes-Benz SA’s chief executive officer Hansgeorg Niefer recently vented his frustration when he said he had difficulty in understanding why there was not more pressure on fuel companies to produce cleaner diesel and petrol in South Africa. He said the unavailability of cleaner fuel in South Africa presented “huge difficulties” to motor manufacturers.

According to Niefer, he has learnt from the oil companies that diesel with a sulphur content of 50 parts per million (ppm) only would be available in South Africa six year form now while Europe and the US already had diesel with 10ppm sulphur content. This would be available in South Africa only in 2020.

It is against this background that KPMG’s Automotive practice director Gavin Maile recently said that the carbon tax has “in reality, little to do with emissions. It largely serves as another revenue source for government to balance its books."

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