Up to £1,500 could be added to the cost of new petrol and diesel cars in order to subsidise electric car purchases, under proposals being considered by the government.
Forcing buyers of more polluting vehicles to pay towards making electric cars cheaper, a so-called “feebate” system, would be one of the most effective ways to encourage a faster move away from fossil fuels, according to a feasibility report commissioned by the Department for Transport (DfT).
The car industry said it was opposed to measures that penalised petrol and diesel buyers rather than just incentivising electric and hybrid car sales.
Other recommendations from the report include forcing all petrol stations to install electric car charge points, giving government bodies incentives to buy electric cars for their fleets, and rebranding existing government support for electric car charging as “free fuel”.
The government is seeking to accelerate the take-up of electric cars, which is seen as a key part of plans to reduce the UK’s emissions of carbon dioxide. Electric cars, with zero carbon dioxide exhaust emissions, accounted for only 5% of total sales in the year to August, according to the Society for Motor Manufacturers and Traders (SMMT).
While the market share of electric cars is accelerating rapidly, the DfT commissioned the Behavioural Insights Team, the so-called “nudge unit” spun out from government, to study ways of encouraging more buyers to switch as it aims to ban sales of new petrol and diesel cars by 2035, or possibly even earlier.
The transport secretary, Grant Shapps, on Wednesday indicated that the government would take up many of the report’s proposals, including green-painted parking spaces reserved for electric cars and installing charging points at tourist sites.
However, proposals to penalise buyers of new fossil fuel cars in order to benefit electric car buyers directly are likely to prove highly controversial. The report noted that support from the public was low.
Mike Hawes, chief executive of the SMMT, said: “We need positive measures, not those that penalise consumers who cannot yet afford the latest electric technology, do not have adequate charging facilities, or for whom driving requirements are not suited to electrification.
“To do otherwise could risk stalling fleet renewal and delaying environmental improvements by leaving them with no alternative but to keep their older vehicle for longer.”
The Conservative government has repeatedly shied away from measures that would raise costs for the drivers of internal combustion engine cars. It has frozen fuel duty for years, at an estimated cost of £5.5bn between 2010 and 2020 – although recent reports have suggested that the chancellor, Rishi Sunak, could be considering raising duty to pay for the costs of the pandemic.
The feasibility report says that a feebate would be preferable to introducing lower rates of VAT for electric cars, another option considered by the report, because a feebate would be more flexible to implement. Both options were among the highest-impact proposals considered by the report.
Feebates, also known as “bonus-malus” schemes, are already in place in other countries, including France and Sweden.