Policy: Mode Target

The Vehicle Excise Duty (VED) targets the private vehicle fleet (both new and second hand). It does not necessarily induce a mode switch away from the car (i.e. car to bus) but aims to induce a shift between vehicle classes towards more energy efficient vehicles differentiated by carbon emissions. For instance, emissions of CO₂ from new passenger cars registered in the UK between 2000 and 2005 have fallen from a fleet average of 181 to 169 gCO₂/km (Mazzi and Dowlatabadi, 2007). However, it is important to note that these carbon savings cannot be solely attributed to the VED but are likely attributable to a host of policies including the car manufacturer Voluntary Agreement (VA) and eco-labeling. The VED may have also contributed albeit not directly towards an increase in the UK from petrol cars towards diesel cars particularly in the company car fleet (Banister, 2007; Mazzi and Dowlatabadi, 2007). Diesel cars are 25% more fuel efficient on average. Between 2001 and 2005, diesel cars have contributed to CO₂ reductions as their market share has grown exponentially at an annual compounded rate of 21%. Figure 2-2 illustrates how diesel market share in the UK had declined from 1995 onward while diesels were gaining market share in the rest of the European Union (EU) largely due to the EU tax regime. Similarly, the changes in the UK tax regime are arguably the turning point for the rise of diesels (Mazzi and Dowlatabadi, 2007).