No more middle of the road: the crunch is coming for pollution

With Brits still buying gas-guzzling cars, the greens on the warpath and the Government missing its targets for slashing CO<SUB>2 </SUB>emissions, the financial climate for motorists may be about to change. Severin Carrell reports

It was the kind of stunt designed to make company directors choke on their cornflakes. At 6am one Monday earlier this month, 35 Greenpeace protesters shut down the production line of one of Britain's most emblematic products: the Range Rover. Yellow "warning" tape, bearing the words "climate crime scene", was stretched over the bumper of one partially built model.

It was the kind of stunt designed to make company directors choke on their cornflakes. At 6am one Monday earlier this month, 35 Greenpeace protesters shut down the production line of one of Britain's most emblematic products: the Range Rover. Yellow "warning" tape, bearing the words "climate crime scene", was stretched over the bumper of one partially built model.

The environment lobby group's executive director, Stephen Tindale, a former ministerial adviser, chained himself to a vehicle, and was carefully filmed by his organisation's in-house video team for immediate distribution to the nation's television networks.

This was a textbook Greenpeace stunt. Like its provocative raid on John Prescott's Hull home last month, to fit solar panels on his roof, it had the element of surprise. The Ford-owned Land Rover now has the unwelcome privilege of running the world's first sports-utility-vehicle production line to be closed down by climate-change protesters.

The event was a warning to Britain's motor, oil and aviation executives. For them - and the Whitehall policy advisers and civil servants who watch these things - it confirmed that climate change is now on the green movement's direct-action agenda. Other 4x4 car makers will be targetted, as will the airlines.

There is, however, a difference between this and past campaigns such as those against nuclear waste processing. On this issue, the environmentalists are pushing at an open door. Within Whitehall - in the Treasury and the Department for Transport - civil servants are quietly discussing more aggressive car-taxation policies that would, if passed, make Land Rover's directors blanche.

The Energy Savings Trust, the Government's energy-efficiency agency, is now pressing for dramatically higher tax on "gas-guzzling" cars, as one of a suite of tougher measures to combat motoring's substantial contribution to global warming. Chief among its proposals is a rise in the vehicle excise duty by 430 per cent for the most inefficient cars.

That such plans are being hatched is down to the Government's failure - and the British motorist's unwillingness - to slash CO ₂ emissions on the country's roads. Against expectations, private car buyers now buy fewer fuel-efficient cars each year - ending a decade-long trend.

On average, the 1.2 million cars privately bought in each of 2003 and 2004 emitted 174g of CO ₂ per kilometre - several grams more than in 2002.

Company fleets are neutralising that effect - but only just. Thanks to the Treasury's strategy to tie company car tax to CO ₂ emissions from 2002, these cars release less than 170g/km on average.

It is now certain the UK will miss a voluntary European Union-wide target - to cut average new car emissions to 140g per km by 2008 - by a wide margin. Of the 15 countries committed to meeting this target, the UK is the fourth-worst - an honour shared with the Netherlands - on emissions. Based on 2002 figures, only Sweden, Finland and Germany are worse.

Tony Blair admitted last December that the Government was likely to break its promise to cut the UK's CO ₂ emissions by 20 per cent by 2010, and would be lucky to reach 14 per cent. And the Prime Minister also knows - thanks to stark warnings from his chief scientist, Professor Sir David King - that the current Kyoto targets will have to be substantially surpassed over coming decades. The European Commission is aiming for a 60 per cent cut in CO ₂ levels - a figure which will require extremely big changes in engine design and fuel efficiency.

This issue is leaving the UK badly embarrassed - and it has the potential to become humiliating, for it seems that China may be beating us on environmentally driven motoring policies. Beijing has now introduced legally binding maximum CO ₂ levels for new cars, based on their weight. In the US, meanwhile, California, Washington and Oregon have introduced bills to enforce cuts of up to 25 per cent in CO ₂ "tailpipe" emissions by 2012.

Also a potential cause of embarrassment is that climate change is one of the Prime Minister's top two issues for Britain's presidency of the G8, beside Third World debt. With the election over, Margaret Beckett, the Secretary of State for Environment, is focusing on a new strategy to rescue Mr Blair's ailing climate campaign and, in some part, his reputation. Her review, being handled by her deputy, Elliot Morley, is due to finish as late as October or November this year.

And it is the attitude of British buyers which is one of the biggest factors in this equation. With some 2.5 million new cars sold each year, British tastes are a central issue, as is the Treasury's behaviour. Thanks to our rising prosperity, the Consumers' Association's successful campaign in 2000 to slash vehicle prices, and the central role that cars play in our self-image, we buy large numbers of 4x4s and other gas guzzlers.

Around 30 per cent of cars sold were in band C last year - a mid-market group made up of common cars such as the Vauxhall Astra and Ford Focus. However, the second-largest sales group was in band F - the highest banding for vehicle excise duty that includes all the larger vehicles, from a basic BMW 5 series up to the thirsty Range Rover targeted by Greenpeace. Nearly 26 per cent of cars sold were in this area, compared to barely 3.5 per cent in the most climate-friendly A and B bands. In all, just 400 of the most environmentally friendly band A cars were sold in 2004.

Here, the greens and the car industry are equally critical of the trust and the Government for mishandling the trust's £20m programme to subsidise the greenest cars and fund advanced research into new technologies - with some justice.

Over the past two years, the trust's TransportEnergy grants system has run out of money and been forced to slash its £1,000 "green car" grants. It failed to predict that the decision to waive the congestion charge in London for cars powered by liquid petroleum gas (LPG) - technology which attracted a trust grant - would lead to a rush for pay-outs.

Its latest scheme - where any new car hitting tough CO ₂ and pollution standards will get up to £1,000 as a one-off sales subsidy - may be delayed for months because the European Commission has yet to decide whether it meets competition laws.

In parallel, the big car makers have also suffered embarrassing miscalculations. Ford tried but failed to sell a two-seat electric car, the Think!, three years ago. Ministers are now signalling that they no longer care for LPG, leaving Ford and Vauxhall saddled with thousands of gas-powered Focuses and vans that they cannot sell.

Against this background, the trust's transport director, Richard Tarboton, wants the Treasury to act with some vigour. Supported by research from the pollsters Mori, it argues that the latest car-buying figures prove existing vehicle excise duty rates are having no impact on the sales of gas guzzlers. The lowest and highest duty bands are only £100 apart - a minimal figure when set against the high fuel and running costs for a luxury vehicle.

To the horror of the car industry, the trust claims that tougher taxation is crucial in changing the behaviour of British motorists. It wants a new duty rate to be introduced - the G band, set at £900 - to target the most gas-guzzling models. This would trap around 300,000 new cars a year.

Ideally, argues Mr Tarboton, this scheme could lead to a wholly different approach, known as "fee-bating". This would give a £150 annual rebate to owners of the greenest, Band A, cars - subsidised by a £750 excise duty charge for the most polluting.

Car makers should find ways of rewarding dealers for selling low-emission cars instead of high-profit luxury models, the trust adds. And the Treasury should reintroduce tax cuts for low-pollution diesels - to promote the introduction of much cleaner diesel engines.

Despite insisting that it too wants to tackle climate change, the car industry is resisting such moves. It claims a new government scheme to put colour-coded energy labels on every new vehicle will be enough to persuade car-buyers to choose energy- efficient models - a scheme that the trust has shown to be fatally damaged by the low costs of vehicle excise duty and drivers' apparent disinterest in petrol consumption.

Yet the car makers originally blocked this proposal, and are now resisting the trust's more aggressive new agenda. The Industry insists that the roll-out of hybrids such as the Toyota Prius and the new Lexus SUV will eventually supply the freedom to choose favoured by its market-led strategy.

This puts the Treasury and the Chancellor in the spotlight, for ministers privately insist that only Gordon Brown has the muscle to drive through a much tougher tax regime. The Prime Minister has been unwilling to take on the car lobby or the voters on this issue, yet neither the green movement nor its friends inside Whitehall seemed willing to take this particular battle to the Chancellor's door. Until now.

FIGHT THE FUMES

Three routes to green cars:

Energy labels

From this autumn, all new cars will carry a colour-coded energy label, modelled on the "red to green" badges used on fridges. Each grade will be based on a car's annual duty figure and will spell out the vehicle's fuel costs. Deep green will be good. Deep red will be bad.

Higher taxes

The Energy Savings Trust wants vehicle excise duty increased by up to 430 per cent - to a maximum £900 a year for high-consumption luxury cars. It wants a new "G" band for the duty to cover the most fuel-hungry vehicles, with ultra-efficient cars let off with a zero-rated annual tax.

Clean-car subsidies

The trust's counter-proposal is to introduce "fee-bating", where fuel-hungry vehicles pay £750 a year to subsidise £150-a-year grants for ultra-clean cars. The Treasury is resistant because it would be complex, but transport ministers have favoured the idea.