Duty incentive proposed for low-emission lorries and buses

Proposals to reduce vehicle excise duty (VED) for lorries and buses with low particulate emissions have been issued by the Department of Environment, Transport and the Regions (DETR).1 But the incentive may be too small to persuade operators of larger vehicles to upgrade their vehicles - while smaller lorries and buses will be effectively excluded from the scheme altogether.

A year ago, the Department of Transport consulted on options to cut VED by up to £500 per year for lorries which met "very stringent" emission standards (ENDS Report 264, pp 34-35 ). In July, the new Government announced its intention to extend the concession to buses.

The DETR has now outlined details of the scheme, which is likely to be implemented later in the year. Roads Minister Baroness Hayman said that the aim is to encourage "hauliers and other vehicle operators to think `green' when they are buying and maintaining their vehicles."

Under the proposals, a vehicle will qualify for a lower VED rate if its particulate emissions meet standards set by a proposed EC Directive (ENDS Report 275, pp 44-45 ). A vehicle which predates or achieves the standard introduced in 1992/3 - known as Euro I - would qualify if it is upgraded to meet the Euro III emission levels proposed for 2000. Other existing and new vehicles meeting the 1996 Euro II standards would qualify on meeting Euro IV standards which are to be proposed for 2005.

The Freight Haulage Association is concerned that the scheme will be based on "standards which are not yet set in stone," with Euro IV standards in particular still the subject of heated debate. The DETR says the concession will be based on "the clear indications of what those standards would be," and will if necessary be amended to reflect the agreed standards.

The DETR says its intention is "not to promote a particular form of technology". But it suggests that the standards could be met either by fitting a particulate trap or re-engining to a higher emission standard - including conversion to compressed natural gas or liquefied petroleum gas. The DETR says re-engining is more likely in buses as these have long operating lives.

Pelham Hawker of Johnson Matthey, which manufactures continuously regenerating particulate traps, says that the Euro III standard could be met by re-engining with advanced diesel engines with no exhaust aftertreatment. The Euro IV standard could only be met by fitting a trap or converting to gaseous fuel.

The DETR intends to base the concession on existing type-approval data for new engines and on a new type-approval process for particulate traps. The Vehicle Inspectorate will certify the fitting of equipment and carry out a separate test, paid for by the operator, to check that it is working correctly. The DETR claims that a visual check is sufficient to confirm that a trap is meeting the correct standard.

However, there is considerable doubt whether the VED concession will be large enough to persuade many operators to upgrade their vehicles. The DETR's "working assumption" is that the concession will be worth up to £500, with vehicles paying a minimum VED of £150.

The cost of fitting a particulate trap is likely to be £2-3,000, and up to £5,000 for some vehicles. The Road Haulage Association noted in response to last year's consultation that it could take up to ten years to break even with a VED reduction of £500. It warned that "none of our members have indicated that they would be inclined to accept the current proposal."

The RHA argues that the Government should instead offer grants to cover the cost of fitting traps. In contrast, Pelham Hawker says that reduced VED could make an impact provided duty is also cut on the low-sulphur diesel which must be used with traps. "We shouldn't forget the potential for wider benefits from reducing the costs of low-sulphur diesel," he says (see pp 3-5 ).

However, the VED concession is likely to be considerably less than £500 for many smaller diesel vehicles. Light goods vehicles, which are a major source of particulates, pay VED of just £150 and would therefore be excluded from the scheme, while smaller goods vehicles and buses pay as little as £160.

The DETR acknowledges that its proposals "amount to a relatively modest concession...in relation to the current cost of particulate trap technology," especially for lighter vehicles. However, it says that marketing of the technology is at a relatively early stage, and hopes to see costs fall in relation to the level of the VED concession.

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