Huge irony in diesel scrappage proposals

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Diesel has been fleet fuel of choice for many years

The huge irony behind newspaper reports that the Government is said to be considering plans for a diesel car scrappage scheme will not be lost on the majority of company car drivers.

The Department of Transport and the Department for Environment, Food and Rural Affairs (DEFRA), was reported in the national press to be considering a scrappage scheme as part of a plan to lower emissions and improve air quality.

Various Government departments were said to be weighing up the pros and cons of a scheme to offer incentives for low emission cars if people traded in their older, more polluting vehicles,

Talks were also said have taken place with the Treasury, which would finance the plan, and officials were looking at developing a scheme which could focus on geographical areas around the country where pollution is worst.

Where’s the irony?

Since April 2002, when the last Labour Government introduced a company car tax system based on carbon dioxide emissions, various administrations have ushered the fleet market down a largely diesel-inclined path. Then Chancellor, Gordon Brown, introduced what was seen as a fundamental, revenue neutral reform of company car tax to cut emissions of harmful greenhouse gases, principally carbon dioxide. This followed a review of the existing regime which was said to encourage those using company cars to drive extra, unnecessary miles on business, producing unnecessary CO2 emissions.

As diesel cars emitted lower C02 emissions than their petrol-powered counterparts, they became the de facto fuel of choice for many company car drivers because they attracted the lowest benefit-in-kind tax bills – despite a 3% ‘dirty surcharge’.

Huge diesel growth

As a result, a market that had hitherto been petrol dominated, swung inexorably towards diesel, and drivers became accustomed to using plastic gloves on Britain’s forecourts and doing their best to avoid getting the noxious fuel on their shoes or clothes.

From a relatively small base, at the peak of the diesel boom derv was consistently claiming a more than 50% share of the new car market – which has ultimately led to more than 11m diesel cars currently being on UK roads.

At the start of 2014, for example, diesel vehicles had a more than 53% market share compared to 45.5% for petrol. However, diesel’s appeal began to decline on the back of the ‘dieselgate’ scandal when Volkswagen was shown to have cheated in emissions tests to produce unrealistic emissions results, while concerns about pollutants including nitrogen oxide (NOx) and particulates, were beginning to increase.

At the same time, sales of lean burn petrol-engine cars climbed in popularity and at the end of last year’s record new car market, petrol power had regained its leadership with a 49% share to diesel’s 47.7%.

Fleet buyers shift from diesel to petrol, hybrids and EVs

Why diesel’s fall from grace?

Diesel emissions have been blamed for the premature deaths of up to 7,000 people a year in London alone, with many more affected in other densely populated urban areas. The problems surround NOx and tiny particulates which are breathed deep into the lungs.

The Government last year announced proposals to tackle high levels of diesel pollution in major city centres across the UK, including London, Birmingham, Leeds, Nottingham, Southampton and Derby.

The plans asked local authorities to look at a series of initiatives, including creating clean air zones, introducing low emission buses and taxis, and using data to create new road layouts.

London has already signalled its intentions to clean up emission levels in the capital, with recently appointed Mayor, Sadiq Khan, outlining new proposals to substantially increase the size of the clean air charging zone in a bid to tackle the air pollution problems the capital faces.

The Mayor has also unveiled a new report with consultants Cambridge Economic Policy Associates, which includes plans for a diesel scrappage scheme for local businesses and low income households.

Under the proposals, van operators would receive £3,500 to scrap vehicles that fell below the Euro 6 standard and have access to a lease guarantor fund to help source a replacement.

Low income households, meanwhile, would be offered £2,000 to get rid of their car in favour of a mobility package, which would include access to public transport, cycle hire and car club or car rental schemes.

Older, polluting, purpose-built taxis would also be targeted, with a payment of £1,000, in addition to other incentives, to scrap vehicles.

The package of measures would be delivered over a two-year period and funded, in part, by a temporary 20% rise in Vehicle Excise Duty (VED) on new diesel cars until 2021.

Scale of the problem

However, any scrappage scheme aimed at removing the dirtiest diesel cars would have to be on a huge scale to have any significant effect, according to analysis by the RAC Foundation, which found that as many as 1.9 million diesel cars fall into the oldest, most polluting Euro standard categories: 1, 2 and 3.

These account for some 17% of the 11m diesel cars on the road and are responsible for 15% of total NOx emissions, based on estimates of real world driving data and annual mileages from MOT records.

The RAC analysis calculated what might happen if a scheme was implemented along the same lines as the one in 2009/10 which was aimed to provide an economic stimulus for the car industry.

This would take 400,000 of the oldest diesel cars off the road at a cost of some £800 million, with the government and manufacturers both contributing £1,000 each to help people who trade in their existing vehicle replace it with a new model.

If every one of the 400,000 older cars was replaced with a new zero-emission electric vehicle, then the cut in annual NOx emissions from the diesel fleet would be about 4,900 tonnes or just 3.2% of the total emissions from diesel cars.

What should fleets do?

The first thing is not to panic! Diesel as a mainstay of fleet operation is going to be around for some years to come, although reports suggest this will be in gradually falling numbers. In many cases, diesel power is still the best tool for the job, especially over long distances.

However, in what is an increasingly complex area, government seems to be re-thinking its approach to diesel vehicles in the longer term and this could increasingly impact on fleet policies in the future.

CLM’s advice is to always discuss the optimum composition of your fleet with your fleet management specialist, as they will be able to call on many years of experience and expertise of dealing with such issues, and be able to provide advice on the best course of action.

If you would like to discuss the most appropriate mix for your fleet, then please get in touch.

March 24th, 2017|Categories: Fleet, Vehicles|

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