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Ireland's political and cultural magazine
62September/October 2015
ENVIRONMENT Cars
T
HE head of the Society for
the Motor Industry in Ire-
land (SIMI) recently
announced that the policy
decision to introduce ,
, etc. car registration periods
had been a great success. I suppose it
depends on how you define success,
but for him and his ‘industry’ (they
should really be called the Confedera-
tion of Car Salesmen, but perhaps the
acronym wouldn’t work) success
could be measured in new car sales.
Making people advertise the age of
their cars on the vehicle encourages
the more insecure among us to change
cars more often than is perhaps
necessary.
Quite why the Irish government
should be in the business of encourag-
ing new car sales isn’t clear, but most
of the ways it approaches transport
and the motor business imply it wants
more new car sales. A few years ago
Ireland introduced a car scrappage
scheme which encouraged people to
dump their functioning ten-year-old
car and get a shiny new car with a
€, subsidy from the taxpayer.
An ‘ Toyota Avensis with a two-li-
tre engine will pay € in motor tax,
where a new Porsche Cayenne might
pay just €.
Taxes are important policy instru-
ments. They incentivise certain
behaviours over others. Think of the
impact our high income tax has com-
pared to taxes paid on income earned
from speculating on property. Many
people earn large amounts on this,
but pay proportionately less tax than
those who have to work for a living.
These car policies may be in place
because the various car taxes bring in
a lot of income. VAT and Vehicle Reg-
istration Tax (VRT) certainly yield a
bounty for the government from new
cars.
But if it’s just about money, taking
old, inefficient cars off the road
doesn’t seem a great idea. The state
also takes a lot in from old cars;
motor tax alone generates over €bn
a year, and we see the state gets far
more from old small cars than new
big ones. As a result the take on motor
tax has been steadily declining, so the
government will need to find that
money somewhere else.
And if it is about income, surely
we’d be better off having that extra
income spent on stuff that generates
extra economic activity in Ireland
rather than in Germany, Japan or
Korea? In their suite of policies suc-
cessive governments seem hell bent
on exporting large amounts of cash.
It can’t be equity either. Taxing
someone who can only afford a ten-
year-old Nissan Micra more than the
guy in the Range Rover doesn’t seem
fair, especially given the symbolism
of, and space taken by, the bigger car.
The new Range Rover is simply not
paying its way.
So presumably the policies are for
environmental reasons. After all the
new Range Rover is much more fuel-
efficient than the old Nissan Micra.
By measuring and taxing cars on the
basis of their carbon emissions we are
encouraging the use of more fuel-
econmic vehicles, and therefore using
less carbon. And it was introduced by
a Green Party minister (albeit as part
of a broader EU policy).
However, in many ways the policies
worked. With great speed car manu-
facturers were able to increase the
efficiency of their vehicles. Most new
cars are more fuel-efficient than
hybrids introduced some years ago
(again attracting significant taxpayer
subsidies).
So should we be thankful for these
policies, and more importantly
should we keep them? Well, no. In
other areas of environmental policy
we are encouraged to reduce, reuse
and recycle. In the car industry we
are discouraged from all three. Lower
motor taxes mean we can afford
bigger cars. Rather than re-use (or
recycle) our old cars we are incentiv-
ised to scrap them (with no check on
whether this is done efficiently, such
as reusing the car for parts).
This would seem sensible if new
cars were carbon neutral, but they
aren’t (not even the fetishised electric
ones). New cars take a lot of carbon
(and other embodied energy) to build.
It’s hard to measure but Mike Bern-
ers-Lee, an author on sustainability,
who has tried to measure the carbon
footprint of nearly everything, shows
that the production of new cars is
really polluting.
This is hardly surprising given
Regime of taxes and subsidies on cars simply doesn’t achieve
purported aims. By Eoin O’Malley
Motor moronism
The reason for
the perverse
incentives
of car tax
is that we
measure (and
charge) carbon
production
rather than
carbon
consumption
“
carbon effect better
than you’d think
carbon effect not as
good as you’d think
September/October 2015 63
their complexity. Cars are now replete
with electronic gadgets. These rely on
difficult-to-extract minerals, ores, oil
etc. Car-manufacturing is not a very
green activity.
Berners-Lee estimates that a new
car causes about kg for each
€, spent. A medium-spec Ford
Mondeo will have left a footprint of
tonnes before it drives a kilome-
tre. A top-of-the-range Land Rover
will use tonnes of carbon.
Even though they are more efficient
than their older replacements you will
need to drive a lot before there is any
environmental benefit to replacing
even an old car. Certainly if you’re an
average driver (about ,km a
year) keeping an old car for five extra
years will be better for the environ-
ment than replacing it. A new
Volkswagen Golf will take about
tonnes of CO to manufacture and
then use about eight more over five
years. An older Golf might use
tonnes over the same five years, about
half the impact.
Electric cars, also subject of gener-
ous subsidies, don’t work either. Their
poor battery life means they don’t get
used much. Look at the second-hand
market in electric cars and you’ll see
just how little. Per kilometre driven
they could be the most polluting of
all. Their only viable future may be
long-term.
Policymakers sometimes don’t
understand the concept of sunk costs,
but drivers do. Sunk costs are monies
that have been spent, and no change
in your behaviour can recover them.
VRT and road tax are sunk costs.
Once you’ve paid for the new car, or
your annual tax then you’ve no incen-
tive to walk or cycle rather than
drive, especially if your car is very
fuel-efficient.
By making road tax high on old cars
we encourage the consumption of
huge amounts of carbon through the
purchase of new cars. A more envi-
ronmentally-friendly way might be to
leave the less-efficient car on the road
where the driver will pay more per
use through fuel costs. A person with
an old car that isn’t driven very often
will be made better off than the regu-
lar driver of the newer car. We should
also add more road-use charges to the
mix. Dublin could probably benefit
from a congestion charge, and from
out-of-town shopping centres with
revenue raising parking charges.
The reason for the perverse incen-
tives of car tax is that we measure
(and charge) carbon production
rather than carbon consumption. We
don’t count the carbon cost of con-
suming a new car produced in Japan
as Irish even if it will only ever be
used in Ireland, and presumably
wouldn’t have been produced if there
was no demand for it here. The Chi-
nese, who produce so much of what
we consume, might be more inclined
to enter emissions limiting agree-
ments if it were the consumers rather
than they who were charged.
Well-intended policies often pro-
duce bad outcomes. But they have an
unfortunate habit of being kept for
long after we realised they don’t
work. •
Dr Eoin O’Malley is senior lecturer in
public policy at the School of Law and
Government, Dublin City University.
If you’re
an average
driver (about
12,000km a
year) keeping
an old car
for five extra
years will be
better for the
environment
than replacing
it
“
