Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by the Environment Agency


  1.  Road transport is a major contributor to poor air quality and to climate change. The Agency is concerned that these vital issues are reflected in future policy on motor fuel taxation.

  2.  The indications are that future gains in both air quality and climate change would be made a lesser cost to society if more were achieved by changes in motor transport.

  3.  We accept the very valid concerns of groups affected by motor fuel taxation, and are happy to work with them and others to improve their situation.

  4.  However, we are of the view that motor fuel taxation has an important part to play in these changes, as part of a package of measures. The main objectives will be:

    —  support for alternative forms of mobility, including changed working and consumption patterns and increased public transport; and

    —  encouragement for a transition to lower, and ultimately "zero" emission vehicles.


  The principal aim of the Environment Agency is to contribute to the national goal of sustainable development in England and Wales, which it does through working for a better environment for present and future generations. Its aim of sustainable development means it is aware of the need to balance environmental needs with social and economic concerns. One of the major themes of the Agency's environmental strategy is to achieve major and continuous improvement to air quality.


  The use of motor fuel has a direct detrimental impact upon the environment, caused by the emission of combustion products. Road transport is a major contributor to a reduction in air quality. This is shown in graph 1, which compares the contribution of road transport and that of other sources to the emissions of a range of serious pollutants. Road transport has also been identified by the DETR's draft climate change strategy as the fastest growing source of greenhouse gas emissions[8].

  Motor fuel causes an increase in human mortality and morbidity, as many of these pollutants are toxic. The precise impacts of road transport on the total effects of air pollution are difficult to quantify. However the overall impacts of air pollution, from all sources, have been recently quantified as 12-24,000 premature deaths and 14-24,000 hospital visits every year[9]. Although these results are uncertain they do give an indication of the effect of motor fuel use on human health.

  Much work has been done to provide estimates of the monetary value of the impact of road transport to society and the environment, including a recent report for the EC.[10]. The 1996 estimates from Maddison, Pearce, et al are still much quoted and respected. They estimated that the annual cost of the impact of road transport on air quality was of the order of £19 billion, and that on climate change, £0.1 billion.[11] This does not include the substantial additional external costs of motoring due to accidents or congestion, which the authors estimated to be of the same order of magnitude as the strictly environmental ones. These estimates are largely based on 1993 data, and therefore are in need of updating. However, they give a credible estimate of the scale of the impact. More work needs to be done to update these estimates and make them more robust and transparent.

  Improvements in air quality to meet the government's National Air Quality Strategy will be met through a combined reduction of emissions through stationary sources and transport. In order to spread the burden fairly and cost-effectively across all sectors of the economy, the Agency believes that emissions from road transport must be reduced as much as possible.

  The Agency welcomes both past efforts to improve the quality of the emissions of road transport, and the Government's proposed measures to achieve lower emissions through transport plans such as Transport 2010[12], which is expected to cut rising CO2 emissions by 1.6M tonnes Carbon and voluntary schemes such as the EU "CO2 from cars" strategy, which asks for a 25 per cent reduction in CO2 emitted per km[13].

  The Agency would wish to see these measures being reinforced through future policy on motor fuel taxation.


  Motor fuel taxation has clearly become a controversial issue. In part this is a recognition of the fact that road transport is a major contributor to the economy and to society, and it will remain so. Recent changes in fuel prices, which have been caused in part, but not by any means exclusively, by taxation, have particularly affected the haulage sector and those in rural areas.

  However the picture is a complex one, and is certainly not a simple case of "paying too much for fuel". In addition to the considerable evidence of the external costs of motoring which we have presented above, the Agency notes the more complex picture that experts in transport economics have presented. Some of the key findings that illustrate the broader picture are:

    —  The total cost of private transport, relative to public, has actually fallen compared to incomes and to public transport since 1974;[14]

    —  On balance the total cost of motoring, including both the cost of fuel and the cost of cars, has remained remarkably stale in the last 30 years;[15] and

    —  There are substantial external costs to the economy caused by congestion, which are undermining the benefits that transport brings to the economy—Maddison & Pearce estimated the costs of congestion to be over £19 billion.

  However, that is not to say that some people are not suffering relative to others. The Institute for Fiscal Studies, for example, does conclude that increases in fuel duty does impose a higher burden on some, including rural dwellers and poorer car-owning households.[16]

  Moreover, motor fuel taxation has not reduced fuel use, although it has most certainly restrained the growth in demand somewhat. The fact is that as incomes rise the demand for private mobility increases. For example, Professor Glaister has concluded that, to hold fuel consumption constant, the price of fuel to consumers would have to rise by 4 per cent per annum, in order to offset the effect of fuel use of the typical annual real increase in income of 2.5 per cent. Therefore, on its own, motor fuel taxation will not provide the complete answer.


  On balance the Agency remains in favour of using tax on road fuel as an integral part of transport and environmental policy. It applies the polluter pays principle and has some influence on behaviour. While it is not a perfect means of internalising some of the external costs, as fuel consumption alone is not a perfect guide to emissions, it is nevertheless simple and effective. Moreover, and very importantly, it can also be used to fund some of the other changes needed (hence the Chancellor has promised that future real increases in duty will be ploughed back into transport).

  However, clearly there are improvements that could be made, which would not only address the real environmental issues identified above, but which could alleviate some of the distributional problems caused. The Agency would be happy to contribute to these measures.

  There are two aims for such a policy that we would particularly support:

    —  changing consumption patterns in a way that made mobility more sustainable; and

    —  changing technology to move to lower emission, or zero emission, vehicle (ZEVs).

  By changing patterns of consumption, we mean addressing issues such as the link between fuel use and income described above, by giving people more incentives to develop a range of alternative ways of deriving the benefits they currently get from road transport in general and private mobility in particular. This could be achieved by a range of carrots and sticks, including:

    —  Congestion charging: this will directly address one of the largest externalities of road transport, make haulage more efficient, and will tend to affect those in rural areas less and it will also have a major influence on air quality, which is often affected adversely by congestion.

    —  Support for public transport (including rail-freight): the Government's increased support is welcome, but much has to be done to offset the relative price disadvantage it has suffered in the past. Moreover there is considerable scope to use further investment or tax breaks, which could turn around the public concerns regarding its cleanliness, safety and convenience.

    —  Support for specific changes in behaviour: measures such as tax breaks for car sharing, purchase of season tickets, working from home and changed consumer behaviour, including home shopping, would help encourage these activities, which would not only reduce pressure on parts of the transport infrastructure, but would also improve air quality.

  The Agency also believes that Government should use some of the revenues from motor fuel taxation to actively pursue the introduction of clean fuel technology. European drivers already enjoy far better fuel efficiency than their US counterparts. This is due in part to the way that fuel taxes have played an important role in structuring Europe's transport system. As the French environment minister Dominique Voynet puts it "the fact that our cars consume two times less than American cars or that a French person consumes five times less energy in travelling than an inhabitant of Houston is not due to chance or geography."[17]. While there have been great increases in efficiency, it is nevertheless worrying that there has been no real decrease in the consumption of motor fuel per km by vehicles since 1984.[18] Future advances in combustion engine technology must be translated into an improvement on fuel efficiency rather than performance.

  Alternative fuels, such as LPG and CNG are both more efficient and less polluting. The Agency is increasing the number of such vehicles in its fleet. They currently enjoy a substantial differential in fuel duty, which is welcome, but the provisions for reducing the large costs of converting new vehicles to take these fuels could be extended to the purchase of new vehicles and to converting older vehicles. It may also be possible to assist the development of networks to supply such vehicles.

  ZEVs also provide improved overall efficiency and reduced emissions, even where there fuel is derived from fossil fuel sources. Here the technology is at an earlier stage of evolution, so effective support might be provided by incentivising manufacturers to target the UK for product launches.


  To conclude, the combined approach of alternatives to private transport, coupled with a more effective method to persuade the public against use of private transport, together with the use of lower emissions vehicles will maintain the mobility of the public whilst reducing emissions. Motor fuel taxation will play an important role in helping to achieve this balance.

October 2000

8   Draft Climate Change Programme, DETR, 2000. Back

9   Committee on the Medical Effects of Air Pollutants, Quantification of the Medical Effects of Air Pollution in the United Kingdom, 1998. Back

10   ExternE, External Costs of Energy Conversion-Improvement of the ExternE Methodology and Assessment of Energy Related Transport externalities, Bickel, Schmid et al 1999. Prepared by AEA technology for the European Commission. Back

11   Maddison, Pearce et al, The True Cost of Road Transport, 1996. Back

12   Transport 2010: The Ten Year Plan, DETR, 2000. Back

13   Draft Climate Change Programme, DETR, 2000. Back

14   Page 235, Quality of Life Counts, DETR, 1999. Back

15   Stephen Glaister, Tax disc losers, Guardian, Monday, 16 October 2000. Back

16   IFS Briefing Note 8, The Petrol Tax Debate, Zoe£ Smith, 2000. Back

17   Speaking at the French Presidency's conference on economic instruments in the EU, Paris, 11 October 2000. Back

18   See for example, the DETR's Climate Change Draft UK programme. Back

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