CO2-Related Car Taxation (EU)

According to ACEA (2009), the number of EU countries with CO₂-related car taxation has gone up to fifteen in 2008. With Germany set to introduce CO₂ related taxation in July of 2009, all Western European countries levy passenger car taxes that are partially or totally based on the car’s carbon dioxide emissions and/or fuel consumption, completing a trend that peaked in 2007 and 2008.

Table 1: Overview of CO₂ Based Motor Vehicle taxes in the EU (ACEA, 2009b)

Country

CO₂/Fuel Taxes

Austria

Fuel consumption tax is levied on the first registration of the car. Petrol cars are taxed 2% of the purchase price x fuel consumption in litres – 3 litres; Diesel cars are taxed 2% of the purchase price x fuel consumption – 2 litres.

Cars emitting less than 120g/kg receive maximum bonus of €300. Cars emitting more than 180g/kg pay penalty of €25 for each gram emitted in excess of 180g/kg. (This goes down to 160g/kg after 1/1/10). Alternative fuel vehicles receive maximum bonus of €500.

Diesel cars emitting more than 5mg particulate matter per km pay penalty up to €300. Diesel cars emitting less than this and less than 80 g per NOx/km (and petrol cars emitting less than 60g of NOx/km) receive maximum bonus of €200.

Belgium

Tax incentives to cars emitting less than 115g CO₂/km as follows:

- Cars emitting less than 105g/km:15% of the purchase price to maximum of €4540

- Cars emitting 105-115 g/km:3% of purchase price to maximum €850

Company car tax based on CO2 emissions

Deductibility of expenses related to use of car (60-90%) linked to CO₂ emissions

In Walloon Region there is a bonus for new cars emitting 145g/km or less up to €1000 for cars below 105g/km and cars emtting more than 195 g/km pay penalty up to maximum €1000 for cars emitting more than 255 g/km.

Cyprus

Registration tax based on vehicle’s CO₂ emissions, ranging form 30% reduction for cars emitting less than 120 g/km to 20% increase for cars emitting more than 250 g/km.

Annual circulation tax based on engine capacity is reduced by 15% for cars emitting less than 150 g/km.

Premium of €683 granted for purchase of new cars with emissions below 120 g/km and €1196 for purchase of hybrid and flexible fuel vehicles.

Denmark

Annual circulation tax based on fuel consumption. Petrol cars vary from 520 DKK (€70) for cars achieving at least 20 km/l fuel to 18460 DKK (€2480) for cars achieving less than 4.5 km/litre fuel. Diesel rates vary from 160 DKK (€21) (cars achieving at least 32.1 km/l) to 25060 DKK (€3364) (cars achieving less than 5.1 km/l fuel)

Registration tax based on price – allowance of 4000 DKK (€537) granted for cars for every km over 16 km petrol or 18 km diesel they can run on one litre of fuel. Supplement of 1000 DKK (€134) payable for cars for every km less than 16 km (petrol) and 18 km (diesel) they run on one litre fuel.

Finland

Registration tax based on CO2 emissions. Rates vary from 12.2% for cars emitting 60 g/km or less to 48.8% for cars emitting 360 g/km or more.

Annual circulation tax (currently based on weight) will be based on CO₂ emissions from 2010 onwards, with rates varying from €20 to €605 annually.

France

Premium granted for purchase of new car if CO₂ emissions are below 130 g/km, with a maximum of €5000 (below 60 g/km). Super-bonus of €1000 granted if car at least 10 years old scrapped and new car purchased has emissions below 160 g/km. Supplement paid for purchase of car with emissions over 160 g/km to maximum €2600 (above 250 g/km). Cars emitting over 250 g/km also pay annual tax of €160. These thresholds to be tightened by 5g/kg every 2 years.

Regional tax on registration certificates based on fiscal horsepower including a CO₂ emissions factor, with rates varying between €25-€46 per horsepower.

Compapny car tax based on CO₂ emissions, varying from €2-19 for each gram for cars emitting 100 g/km or less to €19 for each gram for cars emitting more than 250 g/km.

Germany

From 1 July 2009, annual circulation tax to consist of a base tax and a CO2 tax. Rates of base rate will be €2 per 100 cc (petrol and €9.50 per 100 cc (diesel). CO₂ tax to be linear at €2 per g/km. Cars with emissions below 120 g/km will be exempt (110 g/km in 2012-1013; 95 g/km after that).

Ireland

Registration tax based on CO₂ emissions with rates varying from 14% for cars with CO₂ emissions up to 120 g/km to 36% for cars with CO₂ emissions above 225 g/km. Hybrid & flexible fuel vehicles receive tax relief up to maximum €2500.

Annual circulation tax based on CO₂ emissions with rates varying from €104 (up to 120 g/km) to €2100 (above 225 g/km).

Italy

New cars emitting maximum 130 g/km (diesel) and 140 g/km (other fuels) receive incentive of €1500 if they have car over 9 years old that is simultaneously scrapped. Higher incentives for alternative fuel vehicles.

Luxembourg

Annual circulation tax based on CO₂ emissions, varying from CO₂emissions x 0.9 (diesel) or CO₂ emissions x 0.6 (other fuels). These rates have exponential factor of 0.5 for cars below 90 g/km and increased by 0.1 for each additional 10 g of CO₂/km.

New cars emitting maximum 120 g/km get incentive of €1750 if 10 yr + old car is scrapped simultaneously. Incentive is €1500 if car emits 120-150g/km.

The Netherlands

Registration tax (based on price) is reduced or increased in accordance with car’s fuel efficiency relative to other cars of same size. Maximum bonus is €1400 for cars emitting more than 20% less than average & maximum penalty €1600 for cars emitting more than 30% more than average.

Hybrid cars get maximum bonus of €6400 & cars emitting maximum 95 g/km (diesel) and 110 g/km (other fuels) completely exempt from registration tax. Cars emitting over 205 g/km (petrol) and 170 g/km (diesel) pay additional tax supplement of €125 per gram emitted in excess of thresholds.

Cars with CO₂ emissions up to 110 g/km (petrol) and 95 g/km (diesel) pay lower annual circulation tax.

Portugal

Registration tax based on engine capacity and CO2 emissions as follows:

- Petrol up to 115 g pay (€3.5 x g/km – 329). Diesel up to 95 g/km pay (€10x g/km – 730)

- Highest rates are for petrol cars emitting more than 205 g – (€125 x g/km – 20766) and diesel cars emitting more than 170 g/km pay (€168 x g/km – 21610).

Romania

Special pollution tax (registration tax) based on CO₂ emissions, cylinder capacity and compliance with Euro emission standards. New cars registered between Dec 2008 and Dec 2009 exempt from tax if engine capacity below 2000 cc & they meet Euro 4 and 5 standards or are hybrid.

Spain

Registration tax based on CO₂ emissions, with rates varying from 0% (up to 120 g/km) to 14.75% (200 g/km and over).

New cars emitting maximum 140 g/km and costing maximum €30,000 can obtain interest-free loan up to €10,000 if they simultaneously scarp car 10+ yrs old or 250,000 + km mileage.

Sweden

Annual circulation tax for cars meeting Euro 4 standard is based on CO₂emissions, consisting of basic rate (360 SEK (€33)) plus 15 SEK (€1.38) for each gram CO₂ emitted above 100 g/km. This sum multiplied by 3.15 for diesel cars registered after 2008 & by 3.3 for other diesel cars. Tax is 10 SEK (€0.92) for each gram over 100 g/km for alternative fuel vehicles.

Premium of 10,000 SEK (€919) granted for purchase of ‘environmentally-friendly’ cars: Petrol/diesel/hybrid up to 120 g/km; Alternative fuel/flexible cars with maximum consumption of 9.21 (petrol)/8.41 (diesel)/9.7 (CNG, biogas) cm per 100 km; Electric cars with maximum consumption of 37 kwh/100 km.

UK

Annual circulation tax based on CO₂ emissions with rates varying from 0 (up to 100 g/km) to £400 (petrol/diesel)/£385 (alternative fuels) for cars emitting over 255 g/km.

Company car tax rates range from 10% of the car price for cars emitting up to 120 g/km to 35% for cars emitting 235 g/km or more. Diesel cars pay 3% surcharge up to the 35% top rate.

In 2008, motor vehicle taxes in the EU 15 added up to EUR 378 billion or 4.1% of GDP.

Romania was the first and so far only Eastern European Member State to introduce CO2-related taxation last year as part of a more comprehensive overhaul of vehicle taxation in the country (ACEA, 2009). In most Central and Eastern European countries, the main concern of policy makers remains to reduce the level of old vehicles on the streets with pollutant emission standards of below Euro 3.

Fleet renewal improves both the CO₂ efficiency and the level of pollutant emissions of cars and is essential to achieve the environmental targets society has set. The market incentives and scrapping schemes recently introduced across the EU to soften the impact of the recession benefit both the economy and the environment. Up till March, eleven EU countries had put a fleet renewal programme in place.

According to ACEA, the European car industry welcomes the clear trend towards CO₂-related car taxation as fiscal measures are an important tool in shaping consumer demand towards fuel-efficient cars.

References

ACEA (European Automobile Manufacturers’ Association), 2009. Trend towards CO2-related car taxation continues. http://www.acea.be/index.php/news/news_detail/trend_towards_CO2_related_car_taxation_continues

ACEA, 2009b. Overview of the CO2 Based Motor Vehicle Taxes in the EU. http://www.acea.be/images/uploads/files/20090311_CO2_tax_overview.pdf

According to ACEA (2009), the number of EU countries with CO₂-related car taxation has gone up to fifteen in 2008. With Germany set to introduce CO₂ related taxation in July of 2009, all Western European countries levy passenger car taxes that are partially or totally based on the car’s carbon dioxide emissions and/or fuel consumption, completing a trend that peaked in 2007 and 2008.

Table 1: Overview of CO₂ Based Motor Vehicle taxes in the EU (ACEA, 2009b)

Country	CO₂/Fuel Taxes
Austria	Fuel consumption tax is levied on the first registration of the car. Petrol cars are taxed 2% of the purchase price x fuel consumption in litres – 3 litres; Diesel cars are taxed 2% of the purchase price x fuel consumption – 2 litres. Cars emitting less than 120g/kg receive maximum bonus of €300. Cars emitting more than 180g/kg pay penalty of €25 for each gram emitted in excess of 180g/kg. (This goes down to 160g/kg after 1/1/10). Alternative fuel vehicles receive maximum bonus of €500. Diesel cars emitting more than 5mg particulate matter per km pay penalty up to €300. Diesel cars emitting less than this and less than 80 g per NOx/km (and petrol cars emitting less than 60g of NOx/km) receive maximum bonus of €200.
Belgium	Tax incentives to cars emitting less than 115g CO₂/km as follows: - Cars emitting less than 105g/km:15% of the purchase price to maximum of €4540 - Cars emitting 105-115 g/km:3% of purchase price to maximum €850 Company car tax based on CO2 emissions Deductibility of expenses related to use of car (60-90%) linked to CO₂ emissions In Walloon Region there is a bonus for new cars emitting 145g/km or less up to €1000 for cars below 105g/km and cars emtting more than 195 g/km pay penalty up to maximum €1000 for cars emitting more than 255 g/km.
Cyprus	Registration tax based on vehicle’s CO₂ emissions, ranging form 30% reduction for cars emitting less than 120 g/km to 20% increase for cars emitting more than 250 g/km. Annual circulation tax based on engine capacity is reduced by 15% for cars emitting less than 150 g/km. Premium of €683 granted for purchase of new cars with emissions below 120 g/km and €1196 for purchase of hybrid and flexible fuel vehicles.
Denmark	Annual circulation tax based on fuel consumption. Petrol cars vary from 520 DKK (€70) for cars achieving at least 20 km/l fuel to 18460 DKK (€2480) for cars achieving less than 4.5 km/litre fuel. Diesel rates vary from 160 DKK (€21) (cars achieving at least 32.1 km/l) to 25060 DKK (€3364) (cars achieving less than 5.1 km/l fuel) Registration tax based on price – allowance of 4000 DKK (€537) granted for cars for every km over 16 km petrol or 18 km diesel they can run on one litre of fuel. Supplement of 1000 DKK (€134) payable for cars for every km less than 16 km (petrol) and 18 km (diesel) they run on one litre fuel.
Finland	Registration tax based on CO2 emissions. Rates vary from 12.2% for cars emitting 60 g/km or less to 48.8% for cars emitting 360 g/km or more. Annual circulation tax (currently based on weight) will be based on CO₂ emissions from 2010 onwards, with rates varying from €20 to €605 annually.
France	Premium granted for purchase of new car if CO₂ emissions are below 130 g/km, with a maximum of €5000 (below 60 g/km). Super-bonus of €1000 granted if car at least 10 years old scrapped and new car purchased has emissions below 160 g/km. Supplement paid for purchase of car with emissions over 160 g/km to maximum €2600 (above 250 g/km). Cars emitting over 250 g/km also pay annual tax of €160. These thresholds to be tightened by 5g/kg every 2 years. Regional tax on registration certificates based on fiscal horsepower including a CO₂ emissions factor, with rates varying between €25-€46 per horsepower. Compapny car tax based on CO₂ emissions, varying from €2-19 for each gram for cars emitting 100 g/km or less to €19 for each gram for cars emitting more than 250 g/km.
Germany	From 1 July 2009, annual circulation tax to consist of a base tax and a CO2 tax. Rates of base rate will be €2 per 100 cc (petrol and €9.50 per 100 cc (diesel). CO₂ tax to be linear at €2 per g/km. Cars with emissions below 120 g/km will be exempt (110 g/km in 2012-1013; 95 g/km after that).
Ireland	Registration tax based on CO₂ emissions with rates varying from 14% for cars with CO₂ emissions up to 120 g/km to 36% for cars with CO₂ emissions above 225 g/km. Hybrid & flexible fuel vehicles receive tax relief up to maximum €2500. Annual circulation tax based on CO₂ emissions with rates varying from €104 (up to 120 g/km) to €2100 (above 225 g/km).
Italy	New cars emitting maximum 130 g/km (diesel) and 140 g/km (other fuels) receive incentive of €1500 if they have car over 9 years old that is simultaneously scrapped. Higher incentives for alternative fuel vehicles.
Luxembourg	Annual circulation tax based on CO₂ emissions, varying from CO₂emissions x 0.9 (diesel) or CO₂ emissions x 0.6 (other fuels). These rates have exponential factor of 0.5 for cars below 90 g/km and increased by 0.1 for each additional 10 g of CO₂/km. New cars emitting maximum 120 g/km get incentive of €1750 if 10 yr + old car is scrapped simultaneously. Incentive is €1500 if car emits 120-150g/km.
The Netherlands	Registration tax (based on price) is reduced or increased in accordance with car’s fuel efficiency relative to other cars of same size. Maximum bonus is €1400 for cars emitting more than 20% less than average & maximum penalty €1600 for cars emitting more than 30% more than average. Hybrid cars get maximum bonus of €6400 & cars emitting maximum 95 g/km (diesel) and 110 g/km (other fuels) completely exempt from registration tax. Cars emitting over 205 g/km (petrol) and 170 g/km (diesel) pay additional tax supplement of €125 per gram emitted in excess of thresholds. Cars with CO₂ emissions up to 110 g/km (petrol) and 95 g/km (diesel) pay lower annual circulation tax.
Portugal	Registration tax based on engine capacity and CO2 emissions as follows: - Petrol up to 115 g pay (€3.5 x g/km – 329). Diesel up to 95 g/km pay (€10x g/km – 730) - Highest rates are for petrol cars emitting more than 205 g – (€125 x g/km – 20766) and diesel cars emitting more than 170 g/km pay (€168 x g/km – 21610).
Romania	Special pollution tax (registration tax) based on CO₂ emissions, cylinder capacity and compliance with Euro emission standards. New cars registered between Dec 2008 and Dec 2009 exempt from tax if engine capacity below 2000 cc & they meet Euro 4 and 5 standards or are hybrid.
Spain	Registration tax based on CO₂ emissions, with rates varying from 0% (up to 120 g/km) to 14.75% (200 g/km and over). New cars emitting maximum 140 g/km and costing maximum €30,000 can obtain interest-free loan up to €10,000 if they simultaneously scarp car 10+ yrs old or 250,000 + km mileage.
Sweden	Annual circulation tax for cars meeting Euro 4 standard is based on CO₂emissions, consisting of basic rate (360 SEK (€33)) plus 15 SEK (€1.38) for each gram CO₂ emitted above 100 g/km. This sum multiplied by 3.15 for diesel cars registered after 2008 & by 3.3 for other diesel cars. Tax is 10 SEK (€0.92) for each gram over 100 g/km for alternative fuel vehicles. Premium of 10,000 SEK (€919) granted for purchase of ‘environmentally-friendly’ cars: Petrol/diesel/hybrid up to 120 g/km; Alternative fuel/flexible cars with maximum consumption of 9.21 (petrol)/8.41 (diesel)/9.7 (CNG, biogas) cm per 100 km; Electric cars with maximum consumption of 37 kwh/100 km.
UK	Annual circulation tax based on CO₂ emissions with rates varying from 0 (up to 100 g/km) to £400 (petrol/diesel)/£385 (alternative fuels) for cars emitting over 255 g/km. Company car tax rates range from 10% of the car price for cars emitting up to 120 g/km to 35% for cars emitting 235 g/km or more. Diesel cars pay 3% surcharge up to the 35% top rate.

In 2008, motor vehicle taxes in the EU 15 added up to EUR 378 billion or 4.1% of GDP.

Romania was the first and so far only Eastern European Member State to introduce CO2-related taxation last year as part of a more comprehensive overhaul of vehicle taxation in the country (ACEA, 2009). In most Central and Eastern European countries, the main concern of policy makers remains to reduce the level of old vehicles on the streets with pollutant emission standards of below Euro 3.

Fleet renewal improves both the CO₂ efficiency and the level of pollutant emissions of cars and is essential to achieve the environmental targets society has set. The market incentives and scrapping schemes recently introduced across the EU to soften the impact of the recession benefit both the economy and the environment. Up till March, eleven EU countries had put a fleet renewal programme in place.

According to ACEA, the European car industry welcomes the clear trend towards CO₂-related car taxation as fiscal measures are an important tool in shaping consumer demand towards fuel-efficient cars.

References

ACEA (European Automobile Manufacturers’ Association), 2009. Trend towards CO2-related car taxation continues. http://www.acea.be/index.php/news/news_detail/trend_towards_CO2_related_car_taxation_continues

ACEA, 2009b. Overview of the CO2 Based Motor Vehicle Taxes in the EU. http://www.acea.be/images/uploads/files/20090311_CO2_tax_overview.pdf