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FT REPORT – MOTOR INDUSTRY FLEET MANAGEMENT: Greener rules bear fruit

EXTRACT: Biofuels are useable immediately, according to Shell and could reduce CO2 emission by around 15 per cent. The main problem is that they cannot be generated in commercial quantities without displacing food crops.

THE ARTICLE

By Rob Golding, Financial Times
Published: May 09, 2007

The UK government’s pressure on people to use cars that have a lower CO2 rating has worked well, using first benefit-in-kind taxation and now Vehicle Excise Duty.

In London, there is also likely to be a linkage soon between C02 and the congestion charge.

On top of that, various London borough councils are considering skewing residents’ parking permit charges so that larger cars would have a higher rate levied

The proposed London congestion charging bands (see table) mean that drivers of the lowest polluting vehicles will pay nothing for driving within the Congestion Charging Zone. Those driving the most polluting vehicles will find themselves paying £25 – considerably more than the current £8 standard charge.

The regulatory pressure has seen the CO2 profile of fleets fall as new cars are added. But it is not just on new models that carbon emissions – effectively proportional to miles per gallon – have improved. With some brands, notably Mercedes, midlife engine changes have improved their emissions performance.

The user-chosers have been quick to specify diesel rather than petrol because fuel consumption is substantially more economical.

The UK’s Society of Motor Manufacturers and Traders (SMMT) estimates a bonanza of £44.5m for the UK Treasuryover the next two yearsthrough changes to vehicle excise duty (VED) that will raise the annual charge for band G cars (more than 225g/km) by 90 per cent.

“That means all new cars emitting more than 225 g/km CO2, half of which are not SUVs or four-wheel drives,” the SMMT said.

In the UK, 176,141 new cars were sold last year with emissions above the current band G rate, 225g/km. Of these, 90,302(51 per cent) were sport-utility vehicles or four-wheel-drive off-roaders.

Chancellor Gordon Brown has said that the proportion of least- polluting cars on our roads has risen by 30 per cent, while that of the most-polluting cars has fallen since his measures first appeared.

Mr Brown has also stimulated the use of biofuels by extending the biofuels duty differential, worth 20p a litre, until 2010.

Biofuels are useable immediately, according to Shell and could reduce CO2 emission by around 15 per cent. The main problem is that they cannot be generated in commercial quantities without displacing food crops.

But the legislation that has had the greatest effect on the car rental industry so far has been the creation of the London congestion charge. Companies which operate cars that travel to and through the UK capital spend huge numbers of labour hours sorting out charges and fines.

“Many of our users are foreigners and it is not really their fault that they do not understand the system – but it is a real problem,” says Paul Hainsworth, fleet director of Avis.

If congestion charging and road charging develops as expected, the rental industry will be forced to use telematics to deal with the billing.

Rental companies are also being forced to respond to climate change regulations by making green cars available on their fleets. A high proportion of hirers search for hybrids but rarely book them because of the high price of the cars.

However, the rental companies see a potential competitive advantage in being able toprovide the exact modelsthat prospective customers want. And, says Mr Hainsworth, a large segment of the market knows exactly the car it wants.

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