Is a diesel scrappage scheme next?

There are so many bad stories in the press about diesel cars right now that you’d seriously start to wonder why anyone still buys one? Of course, to give into that assumption is something of the echo-chamber effect of modern, constantly rolling news on the TV and the internet. There is certainly a move afoot amongst politicians and environmental campaigners around the world right now to reduce the sales and use of diesel cars, thanks to concerns over air pollution and public health sparked by the Volkswagen scandal.
If you need reminding, VW was found to have altered its diesel engines to give artificially low readings of Nitrogen Oxides (NOx) when tested under laboratory conditions, but were spewing NOx out all over when being driven on the road. NOx is nasty stuff, and has been linked with serious respiratory disease and as many as 500,000 deaths a year across the EU. Hence the scandal, into which other car makers including Renault, Opel, Nissan and Fiat have now been drawn.

Is petrol better so?

Diesel Dilemmas 4With half-a-million deaths a year ascribed to diesel pollution, no wonder there’s a move against such cars, but those moves ignore one crucial fact — that we also have to bring Co2 emissions under control, and when it comes to Co2, diesel is (currently) better than petrol.
Right now, the Department of Environment is working on a series of proposals to help improve the air quality of Irish cities and, potentially, to curb the use of diesel especially in urban environments. In a statement, a Department official told us that “emissions from transport, and especially diesel engines, are a significant contribution to pollutant loads (particularly in urban areas) and this has direct human health consequences. The Department’s Clean Air Strategy, on which a consultation phase will be launched in the very near future, aims to establish a strategic framework within which policy options in all sectors which impact on air pollution, including transport, can be evaluated and prioritised. While this Department is leading on the Strategy, the setting of motor tax and VRT rates will remain matters for the Department of Housing, Planning, Community and Local Government and the Department of Finance respectively.”
In other words, hold your horses; we haven’t got this worked out yet.

Are the right factors being judged?

Diesel Dilemmas 3The problem is that with the focus on Co2 emissions since 2008, Irish car buyers have been encouraged to buy diesel by default. Only diesel, and generally quite expensive petrol-electric hybrids, can hit the Co2 emissions marks into which the motor tax and VRT system has herded us for the past nine years, and hence the reason why more than 70 per cent of Irish buyers have bought diesel cars since then. That is slowly starting to shift – the percentage is down to 65 per cent so far this year, and new-tech down-sized petrol engines have impressively low Co2 figures, but such technology could take decades, at a natural replacement rate, to spread through the national car park.

How to combat car types

Diesel Dilemmas 2One way to speed up that process is, of course, to meddle with the market by introducing levies, fines, extra taxes or some other sort of punishment for diesel users. Such programmes are already being introduced close to home, such as in London, where Westminster Council is now increasing parking charges for diesel-engined cars by 50 per cent above the standard rate, in an effort to dissuade diesel users from coming into the city centre (where air pollution is concentrated). The London Mayor’s office is also set to introduce a surcharge to the Congestion Charge, which will heap extra costs on the owners of more polluting vehicles entering the city limits.
Could that happen here? It’s certainly been spoken about already, and the DOE’s proposals will doubtless contain at least some measures meant to penalise diesel use. They may include some forms of carrot too, however. Rumours in Leinster House have it that there may be a short-term diesel scrappage scheme, especially for older, more polluting diesel models and that the Department of Finance may be prevailed upon to change the old rule about companies and business users only being allowed to claim back VAT paid on diesel. Being able to reclaim petrol VAT might be enough to push some business users towards down-sized petrol engines and hybrids.

The impact on car values

Diesel Dilemmas 5The worry of course is that any move against diesel cars could cause a massive tumble in the residual values of the 300-odd-thousand diesel cars sold here since 2008. The Government does seem to be trying to avoid that, hence its thus-far softly-softly approach, but some form of diesel second hand value downgrade seems inevitable. As Eoin Bannon from eco-pressure group Transport and Environment explained to us “diesel in Ireland has historically been subject to lower fuel tax than petrol. And this policy of taxing diesel fuel less is wrong because it leads to air quality problems as highlighted in the NOx cheating affair. Also, the OECD and others have concluded that the subsidy is not beneficial for the climate because it encourages unnecessary journeys, boosts sales of more powerful and heavier diesel vehicles, and has caused Europe to be a ‘diesel island’ in a world dominated by petrol drive-trains in cars.
“To consumers, this situation was not their fault. They were misled about clean diesel. But when a policy is harmful it should be revised. Tax modifications, like those planned in France and Belgium, should be made gradually over a period of years to reduce impact on consumers and give them time to adapt. There is no basis on environmental and health grounds for diesel vehicles to have an advantage over petrol ones. By removing the tax gap between diesel and petrol, diesel cars can compete on a level playing field.”