Why are there measures against polluting cars in the world and what is planned for cars with internal combustion engines?
In Europe, 21% of greenhouse gas emissions are due to transport, and road transport accounts for more than 70% of them. Cars have the largest share, accounting for about 12% of total CO2 emissions in the EU. In order to achieve the goal of the European Climate Pact, namely to make Europe climate-neutral by 2050, CO2 emissions from transport must be reduced by 90%. The EC is proposing a ban on the sale of new cars with internal combustion engines after 2035, and 63% of European citizens support a ban on the sale of new diesel and petrol cars after 2030.
Fuel vehicle taxes play an important role as tax revenue and are a policy tool to reduce emissions from cars with internal combustion engines. These fees are increasingly being used to guide consumers’ choices towards buying more efficient and less polluting vehicles. Here are some examples from Western and Central Europe.
The “Bonus-Malus” system is one of the main climate instruments in the French transport sector, successfully contributing to the reduction of average emissions from passenger cars since its introduction in 2008. Revenues from emissions-intensive vehicle fees are used to fund bonus payments for electric vehicles (EVs) to incentivize the decision when buying a car. Various amendments over the years have helped to ensure the effectiveness of the scheme and balance the revenue stream. In 2020, vehicles with CO2 emissions equal to or greater than 110 g/km must pay a fee. The premium for electric vehicles currently is €6,000, while hybrid vehicles are no longer eligible for premium payments. As a result, the average vehicle emissions have decreased by 25% from the launch of the scheme in 2008 to 2017.
Belgian authorities are taking steps to tackle air pollution by introducing the state-run Brussels Air programme, which aims to encourage drivers in the Brussels region to give up their private cars. Any car owner who deregisters their car and/or provides proof of destruction of the vehicle receives an allowance of €900. Owners can sell their car and the state subsidy can be used to buy an alternative mode of transport – a bicycle or a public transport card. Also, Low Emission Zones (LEZs) in the nation’s capital only allow diesel vehicles (DVs) with a minimum Euro 5 standard and petrol vehicles with Euro 2. Violators are being fined €125 for a first offence and €350 for a subsequent offence within a calendar year. One year after the introduction of the LEZ, the amount of nitrogen oxide and fine particulate matter (PM) in the air decreased by 11% and 11.5%, respectively. Since the introduction of the LES, the most polluting vehicles have been banned. In this context, the Brussels-Capital Region is helping micro and small companies to replace their old vehicles and is introducing a premium of up to €3,000 with certain requirements for the new vehicle, one of which is that it is not powered by a diesel engine. Another economic incentive for acquiring a low-emission vehicle, powered solely by an electric motor in Belgium is the reduction of the personal income tax by 15% of the purchase price of a car with a maximum of €5,150. In the Flemish region, electric vehicles are exempt from the eco surcharge, while in the Walloon and Brussels regions they are subject to a minimum tariff.
In the beginning of 2021, Germany introduced a new, progressive tax on cars with high carbon emissions. The two main components on the basis of which the vehicle tax is calculated are:
- CO2 emissions. Every gram above the minimum level of 95 g/km is progressively taxed at between €2 and €4.
- Engine size
- EUR 2 per 100 cm³ for petrol engines
- EUR 9.50 per 100 cm³ for diesel engines
As of 2021, there are 58 low-emission zones in Germany, covering more than 70 cities. Only vehicles with the emissions sticker corresponding to the respective environmental category can enter them.
Map of low emission zones in Stuttgart
Also, in Germany, there are existing restrictions specifically for diesel cars. Since 2018, older and polluting diesel cars are not allowed in several cities in the country, neither in the low-emission zones nor on other specific streets in the city center. The exact rules are different for each location.
An exemption from tax for up to 10 years applies to electric vehicles with first registration between 1 January 2016 and 31 December 2025. Owners of cars with particularly reduced CO2 emissions of up to 95 g/km are rewarded with an annual tax bonus of €30 if the car is registered for the first time between 12 June 2020 and 31 December 2024.
Given the current and planned restrictions, drivers are giving up their diesel cars and their resale values are falling. Many of these dirty diesel cars are being transferred to Central and Eastern European countries, exporting pollution from the West to the East as well.
How are countries in Eastern Europe responding?
In Romania, the following fleet renewal scheme is applied.
A bonus of RON 6,500 (~ EUR 1,315) is granted for scrapping vehicles older than 8 years and:
- RON 1 000 (~ EUR 202) for the acquisition of a new vehicle with CO2 emissions lower than 96 g/km or a new vehicle with LPG fuel.
- EUR 10 000 for the purchase of a new electric vehicle
- EUR 4 500 for the acquisition of a new plug-in hybrid vehicle and RON 2 500 (~ EUR 505) for the acquisition of a new non-plug-in hybrid vehicle
Electric vehicles are not subject to vehicle tax.
Despite the growth of newly registered electric cars in Romania (over 3,000 in 2020), data from the European Federation for Transport and Environment shows that in 2017 alone, 370,000 old and highly polluting second-hand diesel cars were imported into the country.
How do these measures and restrictions on polluting cars affect the market in Bulgaria?
In 2017, more than 100 000 second-hand cars were imported into Bulgaria from the EU, more than ⅓ of which were highly polluting diesels. More than half of the diesel cars are more than 10 years old and do not have the standard particulate filters that all new cars after 2011 are equipped with.
The car fleet in the country is aging, and in 2021 nearly 50% of the registered vehicles are over 20 years old.
Data from the European Automobile Manufacturers’ Association (ACEA) shows that all-electric vehicles and hybrids continue to displace conventional cars from the European market in 2021. At the same time, diesel registrations continue to dominate in Bulgaria – the only country in the bloc where sales for this segment reported growth last year.
The main problem with NOx pollution from the car fleet in Bulgaria is due to the old diesel cars, which are being taken out of use in the EU and whose imports in the last 4 years are the reason for the growth of over 200 thousand. Amid this trend, the number of new diesel vehicles registered in the country during the last year is only 3,032. Also, there is continued demand for diesel cars in Bulgaria as there is no legal and financial mechanism to restrict the import, sale, or use of older diesels.
Although according to the European Automobile Manufacturers’ Association (ACEA) 2018 report, emissions from modern diesel vehicles are far below the NOx standards in force since 2020, the share of newly registered diesel vehicles has fallen by 31.5% in 2021 in all Europe except Bulgaria. We are the only country in the EU where sales of new diesel cars are growing and the growth is by 15%.
These data show a clear trend towards the phasing out of diesels, as well as petrol cars, with a 63% increase in the share of newly registered electric and hybrid cars in the last year alone in the EU. In Bulgaria, diesel cars are preferred because of their reliability and efficiency and as a means of long-distance driving. This means that the tax measures should focus mainly on the excise duty on diesel fuel, as well as on high environmental fees for the registration of cars that do not meet the environmental standards for the second eco group. This would discourage buyers attracted by their lower price in the second-hand market.
Combined with the gradually increasing planned restrictions on the entry of old cars in the central parts of large cities, through the introduction of low-emission transport zones (for Sofia expected to start from October 2022 and with plans for their introduction in Plovdiv and probably Varna), such a series of measures would make the purchase and maintenance of polluting cars pointless, especially for private use. There will also be an impact on long-distance service trucks. It is strategically important that these restrictions and tax measures are introduced urgently before the wave of imports of such cars floods the domestic market. It is also necessary the revenues from taxes and charges to go into a green fund which would provide alternatives for greener and more cost-effective travel, such as an improved bicycle and rail network, financial incentives for buying a bicycle and a public transport card.
This analysis is made by Environmental Association “Za Zemiata” in the context of increasing measures to limit vehicles with internal combustion engines, 2022.
Iva Dimitrova, Todor Slavov – Economic Justice Team;
Dragomira Raeva – Clean Air Team