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European car industry supports CO2 tax on cars

The European car industry says that it supports the further introduction of CO2-based taxation for cars in order to incentivise fuel efficiency.

The European Automobile Manufacturers’ Association (ACEA) believes that tax measures are an important tool in shaping consumer demand towards fuel-efficient cars, and help create a market for breakthrough technologies, notably during the introduction phase. Innovations generally first enter the market in low volumes and at a significant cost premium, and this needs to be offset by a positive policy framework.

The organisation says that electric mobility will make an important contribution towards ensuring sustainable mobility. However, advanced conventional technologies, engines and fuels will further play a predominant role for years to come. Governments must continue to include these CO2-efficient technologies and solutions in their overall sustainable mobility policy approach.

Failure to harmonise tax systems weakens the environmental benefits that CO2-based taxation and incentives can bring. European automakers have long called for the abolition of car registration taxes which are still widely applied in the EU. Generally, registration taxes threaten fleet renewal. A harmonised CO2-based tax regime for cars should be a priority, applying a linear, technology-neutral system that is budget neutral in end effect. It would maximise emission reductions, support manufacturers and maintain the integrity of the single market.

The European Automobile Manufacturers’ Association Tax Guide 2010 shows that seventeen EU member states levy CO2-related taxes on passenger cars, and fifteen governments provide tax incentives for electrically chargeable vehicles.

The seventeen EU countries that levy passenger car taxes partially or totally based on the car’s carbon dioxide (CO2) emissions and/or fuel consumption are: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Ireland, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Romania, Spain, Sweden and the United Kingdom.

By April last year, sixteen Member States had CO2-related taxation, up from fourteen in 2008, eleven in 2007 and nine in 2006. New to the list are Germany, that introduced a system in the summer of 2009, and Latvia. Italy chose not to prolong its one-year fleet renewal scheme which included both CO2-based incentives and incentives for electric vehicles.

Incentives for electrically chargeable vehicles are now applied in all western European countries with the exceptions of Italy and Luxembourg. New to the list is Belgium. The Czech Republic and Romania take the number of member states up to fifteen. The incentives mainly consist of tax reductions and exemptions, as well as of bonus payments for the buyers of electric vehicles.

In 2009, the market share of cars emitting 120 g/km CO2 had risen to 25%. Cars with emissions above 160 g/km CO2 accounted for 23% of the market, compared to 39% in 2006 and to 80% in 1995.

A summary of the annual ACEA Tax Guide is available at

Keywords: European car industry supports CO2 tax on cars, European Automobile Manufacturers’ Association Tax Guide 2010, ACEA Tax Guide