Our current system of motor taxation does a poor job of this, with the vast majority of revenue raised from taxes closely linked to the amount of fuel used to drive a vehicle. Although these are somewhat related to the social cost of emissions from motoring, they are poorly targeted at most other social costs.
Foremost among these are the costs of congestion, estimated by the European Commission to be among the highest in the EU. These depend on when and where – not just on whether – a car is driven, which fuel taxes are incapable of reflecting. There is a case for replacing the non-carbon component of excise duty on motor fuel – currently 30-40 cent per litre – with a congestion charge in our biggest and most congested cities.
In addition to aligning motoring taxes more closely with the social costs of driving, shifting away from fuel duty and towards congestion charging would – despite costing revenue in the short-run – put the public finances on a sounder footing in the long run. There is also a need to reform VRT and motor tax – which are both currently closely linked to fossil fuel consumption – as well as our system of road tolls which do little to discourage socially costly driving.
OpEd Work. From. Home.