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Think tank Policy Exchange is calling on the Government to increase road tax on new diesel cars in order to improve air quality.
According to the lobby group, an increase in the first year Vehicle Exercise Duty rates by up to £800 could generate up to £500m a year for the treasury.
Policy Exchange said the proposed £800 hike is equivalent to raising fuel duty on petrol and diesel by 1%.
Under the plans, the additional revenue generated would be used to fund a scrappage scheme providing £2000 grants to who scrap older diesel vehicles, with the matched funding from manufacturers.
Policy Exchange claims that diesel cars and vans are responsible for 70% of NOx emissions in London, and if air pollution stays at current levels it could reduce the average life expectancy of Londoners born in 2010 by up to two years.
The proposed VED increase would only be applicable to new diesel cars, and not other vehicles such as vans, states Policy Exchange.
"London and many of the UK's other major cities are facing an air pollution crisis, with residents exposed to illegal and unhealthy levels of NO2 pollution," said Richard Howard, head of environment and energy at Policy Exchange. "If we are to clean up air pollution, then the Government needs to recognise that diesel is the primary cause of the problem, and to promote a shift to alternatives."
"This needs to be done in a way which does not unduly penalise existing diesel drivers, who bought their vehicle in good faith, and gives motorists sufficient time to respond," he added. "Instead of increasing diesel fuel duty or banning diesels from city centres, the Government should look to increase taxes on new diesel cars and offer scrappage grants to take old polluting diesels off the road."
According to to the SMMT, 1,276,871 diesel cars were registered in 2015, representing a 48.5% market share.
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