Is the 3% diesel waiver on the way back, ask Guy Bird?

I was chatting to a colleague the other day about company car tax – as you do – when he suddenly said: “Isn’t it about time there were some tax incentives for Euro5 diesel-engined cars?”

I heartily agreed. Any move to encourage early adoption by business drivers of greener engines and accelerate such model introductions by manufacturers ought to be a good thing, just like it proved with the 3% tax band diesel penalty waiver for Euro4-compliant cars in advance of that standard becoming mandatory. But do the Government or the EU think it’s a good idea too?

The good news is that the European Commission has already laid the groundwork for such a move. Digging through the Preliminary Draft Proposal for a Regulation of the European Parliament and of the Council Relating to Rmissions of Atmospheric Pollutants from Motor Vehicles (Euro 5) – I get all the fun gigs – there is a paragraph that read: “Member states are free to introduce fiscal incentives to reduce emissions beyond the Euro 4 emission standards which have applied since January 2005.”

&#8220An announcement on Euro5 diesel tax breaks could well be made in the Pre-Budget Report this November.”

Guy Bird

Germany has already made an exemption for cars with particulate emissions (the nasty soot stuff also known as particulate matter or PMs) under 0.0085g/km and similar incentives are being considered in other parts of continental Europe for sub-0.005g/km cars – the new Euro5 emissions limit for PMs. Now while 0.005g/km might seem like a ground-scrapingly low emissions bar to limbo under when compared to CO2 normally measured in the 100s, in the world of PMs it’s do-able. In fact, some major carmakers are already there. Toyota’s D-CAT engine with just 0.002g/km is available now in the Avensis, Auris, Rav4 and Verso as well as the Lexus IS220d. Vauxhall’s 1.7 CDTi Corsa is another and Fiat‘s iconic 500, due in January, will be a further model boasting Euro5 compliance for all engines. The key to compliance has a lot to do with a – for now quite pricey – diesel particulate trap for the PM reductions and tweaks to reduce Nitrous Oxide by 20% too. However, given that the Euro5 standard is not due to come into force until September 2009 for all new models of car, January 2011 for all new conventional cars (and January 2012 for heavier two-tonne plus seven-seaters, 4x4s, LCVs and special needs vehicles) there’s still plenty of time to incentivise early take-up before the mandatory measures come in.

Having the first Euro5 diesel offroader in particular would be quite a feather in the cap of any carmaker – and help further negate the bad press such shaped cars attract.

The best news of all is that an enquiry to the Treasury press office on the subject yielded the highly promising response that an announcement on Euro5 diesel tax breaks could well be made in the Pre-Budget Report this November and confirmed in the 2008 Budget for April 2008 implementation. Fleet drivers looking to buy sub-120g/km CO2 Euro5 diesel cars – due to slot into a 10% tax bracket from next spring – could soon have cause for celebration.