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  • Results from new car emissions tests too unreliable to base taxes on

    The new car CO2 emissions test is producing unreliable results making it unfit for setting vehicle taxes at the moment, new data analysed by Transport & Environment (T&E) shows. This supports the European Commission’s evidence last year that carmakers are manipulating the new WLTP test to make their emissions look worse until 2021 and thus make CO2 reduction targets in 2025 easier to comply with. Governments should hold back on basing taxes on the new test and instead prepare a more comprehensive overhaul of vehicle taxation that accelerates the uptake of electric cars, T&E said.[1]

    The new test, called WLTP, was designed to give customers a more realistic picture of a car’s fuel efficiency and CO2 emissions than the old NEDC test. In July 2018 the Commission found that in the new test carmakers were switching off the start-stop function, adjusting the gear-shift patterns and using depleted batteries to burn more fuel and artificially increase emissions. By artificially increasing their CO2 emissions now, and then deflating them once the baseline for the 2025 CO2 targets is set, carmakers are weakening the recently adopted standards for new cars.

    A comparison of carmaker average CO2 emissions tested in 2018 under the old NEDC test with figures in early 2019 under the new WLTP test shows the emissions gap jumping between 1% and 81% for different carmakers. While part of this deviation is due to differences in models sold in these periods – for example, fewer electric vehicles, more SUVs – the data does suggest WLTP figures are unstable and confirms governments should not rush into shifting tax systems to the new test. Data from the old test will continue to be available for a number of years and should be used until there is a more robust and independent analysis of the WLTP’s impact.

    Julia Poliscanova, clean vehicles and emobility manager at T&E, said: “Carmakers manipulate the new test to artificially inflate their emissions now and cheat future CO2 targets. At the same time they want governments to reduce car taxes to allow for their cheating. Governments should resist the pressure and continue to base their tax systems on the old NEDC test.”

    Many finance ministries, including those in Germany, the UK, Belgium and Portugal, are currently reviewing their CO2-based taxes because of the switch to the new test cycle and as part of wider efforts to reduce vehicle emissions in line with the EU’s 2030 climate targets. T&E said governments should prepare a comprehensive reform of car taxation.

    Ministries should phase out financially unsustainable subsidy schemes for electric cars which – at the rate of up to €5,000 per car – would end up costing EU governments over €11 billion a year in 2025.[2] Instead governments should introduce bonus-malus car purchase taxes and reform company car taxation. Cars sold to companies account for up to 65% of new sales in some countries and are the most suitable early market segment for electric cars.

    Governments should reduce subsidies for internal combustion cars and adjust benefit-in-kind and other taxes to ensure all new company cars are electric by 2030. Recent reforms of vehicle taxation in Sweden, the Netherlands and – to some extent – Italy can serve as an example for countries considering changes to car taxation.

    Julia Poliscanova concluded: “We need to fundamentally change the way we tax cars. Today’s taxes promote a transport system that is dominated by individual car ownership, poor air quality and increasing carbon emissions. Company cars are a case in point with taxpayers spending billions subsidising mostly large diesel cars. We need to cut back on these subsidies and make sure that by 2030 all remaining company cars are electric.”

    Note to editors:

    [1] Electric refers to both battery electric and hydrogen fuel cell cars.

    [2] Calculated as 15% of all car sales (15 million in 2017) being electric in 2025 as per the new car CO2 standard.

    Read more:

    T&E paper: How vehicle taxes can accelerate electric car sales