Carbon dioxide or CO2, is a naturally occurring gas that is present in everyday conditions in the Earth’s atmosphere. All humans exhale carbon dioxide when they breathe and plants through photosynthesis absorb it to grow. CO2 is a greenhouse gas as it is part of the Earth's atmosphere which keeps the world at a temperature which is liveable.
CO2 is produced from fossil fuels such as coal, peat petroleum and natural gas. Human activities for example such as the burning of fossil fuels release extra C02 (and other greenhouses gases) into the atmosphere, increasing atmospheric C02 leading to problems such as climatic instability.
As part of the introduction of the new CO2 based VRT and road tax systems, the motor industry have in consultation with the Department of Environment, established a new colour coded labelling system for new passenger cars. These labels, which are displayed on or near any new car for sale, provide valuable information to assist consumers in making their environmental decision with details on the CO2/km for the car, the appropriate VRT and motor tax rates and fuel usage and consumption information.
Since the 1st July 2008, a CO2 label should be displayed beside all new cars that have been prepared for sale and are on show at the point of sale.
The CO2 labels were launched by Mr. John Gormley, T.D., Minister for the Environment, as a key part of the Governments CO2 Strategy and to remove a lot of the confusion among consumers regarding the VRT and Road Tax changes that were introduced at the time. The national labelling system has seven colour-coded bands should be familiar to consumers from the energy labels already in use for certain electrical goods. The overall approach is intended to assist buyers in evaluating the environmental impacts of different cars, as well as providing guidance for them on purchase and running costs. Rather than introduce the new system with penalties etc. for non-compliance, the Department agreed that it should be introduced initially on a non-statutory basis and it applies only to new cars on show at the point of sale.
In 2008 the Irish Government introduced a change to CO2 based taxation to reduce emissions from cars and protect the environment. The motor industry and car buyers supported the change with a huge reduction in the average CO2 emissions of cars sold since July ‘08. A Scrappage Scheme was announced in the December 2009 Budget with an extension into 2011, to incentivise motorists with vehicles over 10 years to change into newer cars.
While the scrappage scheme was successfully, the years that followed seen a decline in new cars sales due to recession, recovery has been slow due to economic factors such as Brexit for example which is currently impacting on the new car market along with an increase in used car imports.
The average age profile of a car in Ireland is 9 years, as motorists have held onto their vehicles for longer. Older cars are not as environmentally friendly as newer cars as many are not fitted with a DPF (Diesel Particulate filter) and negatively impact on the environmental progress which has been made here by the improvement in new car sales since 2013.
The automotive industry is working hard to reduce emissions by investing in more fuel‑efficient technologies and alternative fuel sources. The EU has set targets for reducing CO2 emissions from cars by 2021 and also under the 2030 energy and climate package.
While the Motor Industry continues to reduce emissions with improvements in technology, other stakeholders also have a vital role to play. Fuel-efficient driving, or "eco-driving", can significantly reduce fuel consumption and lower CO2 emissions.
Eco-driving training can lead to a fuel economy of up to 25%, with a significant long-term effect of 7% under everyday driving conditions.
The downward trend in average CO2 emissions for new cars sold has been firmly established since 2008. However, in 2017, there has been a small increase of 0.1%. This is most likely due to a trend towards petrol and away from diesel cars in 2017. In the first quarter of 2018, average CO2 emissions for new cars sold were 1.4% higher than a year earlier. This would produce a calculated increase of around 2,000 Tons in annual CO2 for new cars registered so far this year. Average emissions for used imports were 3.8% lower than a year earlier. However, in the first quarter of 2018, average emissions for new cars stood at 113.20 Gms/KM and 121.05 Gms/KM for used imports.
Average CO2 Emissions
New Cars by Engine Type
New Cars by Emissions
Emissions issues pose a considerable structural challenge to the motor industry over the coming years.
Firstly, the changeover to WLTP could significantly increase the price of an average new car, depending on the pathway chosen. Secondly, the taxation of diesel and petrol vehicles is becoming an issue of considerable debate. A recent report from the Economic & Social Research Institute (ESRI) and the EPA looks at the environmental impact of the charging of vehicle registration tax and motor tax in Ireland on the basis of CO2 emissions, which resulted in a significant switch towards diesel-powered cars. In 2009 just 13% of new cars registered were in the lowest emission category (Category A, less than 120 g/CO2/km). In 2016, this stood at 78%. The study states that as a consequence of increasing diesel consumption, significant air quality issues have arisen as vehicles emit NOx and particulate matter (PM) as well as CO2, and diesel vehicles emit more NOx and PM than petrol vehicles. The study simulates what would happen if the diesel excise rate was increased by 22% to bring it into line with the rate on petrol. The conclusion is that an equalisation of excise rates of petrol and diesel to the current rate for petrol would reduce fuel consumption, drive down vehicle-related emissions and provide a revenue boost to the Exchequer.
The arguments made in this study look ill-timed and ignore the realities of what is already happening in the market.
The analysis is based on older data which showed diesel cars having 73% market share. Without any changes to relative taxation, this share is already reducing considerably. In the first three months of 2018, diesel cars accounted for 56.3% of total new registrations, down from 66.7% in the first quarter of 2017; petrol cars accounted for 37.5% of the total, up from 29.6% in 2017; and petrol electric accounted for 5.4% of the total, up from 3.1% in 2017.
The trend away from diesel is already well established, and any intervention in the market at this juncture would risk having negative unintended consequences. Changes would reduce the value of second-hand diesel cars and increase the cost of change to a new car. New cars, be they diesel or petrol, are becoming increasingly fuel efficient and environmentally friendly. By making it more expensive to change, this could increase the age of the car fleet, with negative environmental consequences, and also consequences for Exchequer revenue as less new cars are sold. It is also worth noting that with the recent move away from diesel towards petrol, CO2 emissions are now trending upwards again, after a prolonged period of desirable decline.
Diesel is a very important component of the Irish car market, with a very high level of trade-in against new cars being diesel, and most PCP contracts written to date are for diesel cars. Diesel is also the fuel of choice for rural business.
It would be ill-considered and ill-advised to accept the recommendations of the ESRI report. Its negative consequences would undoubtedly result in the negative consequences outweighing any positive consequences. The market should be allowed work without interference at this juncture, and the push towards electric cars should remain a key priority.
 ‘The Environmental Impact of Fiscal Instruments’, Edgar Morgenroth, Martin Murphy & Kyle Moore, ESRI/EPA, February 2018