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Tax costs of electric cars in the UK

UK Government transport minister Geoff Hoon outlined a plan to introduce incentives of up to £5,000 for drivers to buy electric and hybrid cars from 2011. Environmentally this is a major step towards reducing carbon emissions in the UK and a £5,000 bonus during the recession is likely to be very tempting to many car owners looking to upgrade.

Part of the government scheme also covers the steps required to recover the £22bn tax short fall that would be created with the long term introduction of electric vehicles. Currently fuel duty contributes £22bn towards the UK economy, while road tax adds a further £5bn. However, as electric cars don’t use petrol or diesel (and therefore can’t be charged any duty) and are currently exempt from road tax, steps must be taken to fill the tax void that would be created in the form of road pricing.

As well as the tax issue and the deficit left in the governments budgets, there are also a number of knock-on effects caused by the wide spread introduction of electric vehicles:

  • Recharging – the infrastructure changes required to provide charging facilities for a whole country of electric cars and vehicles is enormous and whilst £20bn has been committed to this part of the scheme, many more cost and practicalities have yet to be considered.
  • UK power grid – the current grip would not be able to cope with the rapid increase in demand caused by a huge surge in the use of electric vehicles and it’s estimated that up to eight more fossil fuel of nuclear power stations would be required. This would have a further knock-on effect on the environmental impact of electric cars.
  • Battery recycling – electric cars use a variety of battery technologies to keep them powered using a number of chemical compounds and materials. Schemes would need to be introduced that allow the recovery, recycling and safe disposal of these materials.
  • On-going costs – the UK currently has the highest domestic electricity prices in Europe which have trebled in price over the last decade. The benefits to the environment are undeniable but to the true cost to motorists and benefits of switching may be financially negligible.

Gordon Brown has stated that he wants Britain to be a world leader on environmentally friendly technology and would consider buying electric cars for government ministers as an example. So while the Department for Transport states that adoption of electric cars with a range of thirty one miles or more would cut road transport carbon emissions by fifty percent, it appears that the government is strongly committed to green cars but the longer economic and environmental issues have yet to be fully considered.

More details are available on the ultra-low carbon vehicles government website and from the Department of Transport.


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One Response to “Tax costs of electric cars in the UK”

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