Policy: Ancillary Impacts

Social Equity

There is potential for the VED to have regressive social impacts. For example, rural households may be disproportionately affected due to preferences for larger passenger vehicles. This may incur a welfare loss where consumers are forced to purchase vehicles other than their preferred choice in the absence of a tax (Koopman, 1995; COWI, 2002; Gray et al., 2006). Anable and Bristow (2007) indicate that increasing VED rates in the UK would currently have marginal impact on poorer households because few own post – 2001 vehicles. However, if all rates were to increase, Ekins and Dresner (2004) estimate that the impact would be regressive across the car owning income distribution because although increasing the VED range while decreasing rates may initially benefit consumers in the new car market, over the longer term these cars would reappear in the second hand market (Anable and Bristow, 2007). However, taxes on large vehicles purchased by more affluent households could be used to subsidise smaller vehicles thus redistributing from rich to poor while reducing pollution. Although this sounds appealing, Myles and Uyduranoglu (2002) indicate that discriminatory policies that simply target higher-quality cars should be treated cautiously because it is possible that the additional expense of operating a higher-quality car means that it may be used less resulting in lower externalities when compared to greater use of a lower-quality car.

Diesel Emissions

Carbon related vehicle taxation has contributed to increasing diesel market penetration where between 2001 and 2005, UK diesel market share has grown exponentially at an annual compounded rate of 21% (Mazzi and Dowlatabadi, 2007). However, there are two implications to this; First, CO₂ exhaust from diesel is implicitly taxed at a lower rate than petrol and second, although diesel is more efficient with respect to CO₂ emissions there are considerable drawbacks due to PM₁₀ and NO_X emissions (Kunert and Kuhfeld, 2007). Approximately 90 deaths per year are attributed to higher emissions of particulate matter from diesel (Mazzi and Dowlatabadi, 2007). Mazzi and Dowlatabadi (2007) further suggest that additional mortalities can be attributed to increasing EURO vehicle emission standards and increasing take up of diesel engines. Moreover, to the extent that CO₂ policies contribute to diesel growth, coordinating CO₂ and emission standards are necessary to reduce negative impacts upon human health (Mazzi and Dowlatabadi, 2007).