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Emissions related charging: 
Impacts on the vehicle market 
 
 
 
Final Report 
 
Transport for London 
 
August 2007 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For and on behalf of Experian 
 
 
Approved by: 
Dr Neil Blake 
 
 
Managing Director of Global 
Position: 
Economics 
 
 
 
Date: 
8th August 2007 
 
 
 
 
 
 
 

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Emissions related charging - Impacts on the vehicle market 
 
August 2007 
 
Contents 
    
 
 
 
 
 
 
 
 
Executive Summary....................................................................................................................................1 
Introduction: The Research Process ........................................................................................................3 
1 
Context: Climate, carbon and cars .................................................................................................5 
2 
Context: The national car market and the significance of London..............................................7 
3 
Context: Emissions related Congestion Charging proposals......................................................9 
4 
Drivers of change: Costs and spending....................................................................................... 11 
5 
Drivers of change: Market change................................................................................................ 13 
6 
Drivers of change: New designs................................................................................................... 15 
7 
Drivers of change: Fuel Technologies ......................................................................................... 17 
8 
Policy intervention: The EU........................................................................................................... 21 
9 
Policy Intervention: California legislation....................................................................................24 
10 
Policy intervention: Company car taxation in the UK ................................................................. 26 
11 
London’s market: The total vehicle parc...................................................................................... 30 
12 
London’s market: The parc of cars pre and post-March 2001 ................................................... 32 
13 
London’s market: New cars in 2006 ............................................................................................. 35 
14 
London’s market: Recent trends .................................................................................................. 38 
15 
Congestion Charging: Understanding the costs of motoring.................................................... 40 
16 
Congestion Charging: Impacts on the cost to motoring ............................................................ 42 
17 
Congestion Charging: Cars travelling in the zone ...................................................................... 44 
18 
Congestion Charging: The low CO2 discount ............................................................................. 46 
19 
Congestion Charging: The higher charge for band G................................................................. 49 
20 
Congestion Charging: The higher charge for older large cars .................................................. 51 
21 
Congestion Charging: A higher charge and removing the residents’ discount ....................... 53 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
Executive Summary 
 
Experian Business Strategies in partnership with the ESRC Centre for Business Relationships, 
Accountability, Sustainability and Society were commissioned by Transport for London to 
examine proposals to introduce Emissions Related Congestion Charging in which the level of 
the charge would depend on the level of emissions of carbon dioxide from vehicles.  
 
The proposals are set in the context of the Government’s 2007 Energy White Paper and the 
Mayor of London’s Climate Change Action Plan which both aim to reduce emissions of CO2. 
Some 22% of London’s emissions of CO2 come from road transport. London has a large market 
for cars, comprising 9-11% of the 26 million cars registered in Britain, so changes in London 
influence the national picture. The proposals build upon Vehicle Excise Duty in which cars are 
banded by emissions of CO2. Cars with low emissions would receive a “low CO2 discount” 
from London’s Congestion Charge while cars with high emissions would pay a “higher charge”. 
 
The market for cars is changing. The past decade was characterised by little change in the price 
of new cars and falling prices for used cars – but rising prices for fuel and servicing. As the 
market changes this affects the level of CO2 emissions, for example the adoption of diesel over 
petrol, or demand for smaller cars or new types of cars, are likely to shape the market in the 
future. There is potential for new designs of cars by remapping engines and powertrains and 
reducing weight, and the development of new fuel technologies – biofuels, gaseous fuels, 
hybrids, battery-electric, fuel cells. Each of these designs or technologies have advantages and 
disadvantages and different timescales to take effect. 
 
The proposals for Emissions Related Congestion Charging follow a precedent of other policy 
interventions across the world that influenced the car market and emissions. There are relevant 
case studies from: the European Union with voluntary agreements with the car industry and 
proposals for new regulations; California with a long history in leading legislation to promote 
air quality and influence the car industry; and the 2002 reforms of company car taxation here in 
the UK which directly tied tax rates with CO2 emissions and impacted on the car market. 
 
Detailed analysis of DVLA data provided a picture of the 2006 ‘parc’, the stock of registered 
cars, within London. This estimates that there are over 3 million vehicles in London of which 
around 2.8 million are cars. Up to 7% of these cars would meet the criteria for a higher charge – 
almost 140,000 because they are post-2001 cars equivalent to the high emission band G and a 
further 60,000 that are pre-2001 cars with engine sizes of above 3000cc; 0.4% of cars, around 
12,000, would meet the criteria for a low CO2 discount. However, both these percentages are 
rising. For up to 150,000 identified new registrations in London in 2006, it is estimated that 
10% met the higher charge criteria while 4.5% met the criteria for a low CO2 discount. 
 
When a motorist chooses a car, there are many factors that shape the choice – such as price, 
size, safety, comfort, image etc. At present, the level of CO2 emissions is only a minor 
influence on the choice of a car – the objective of the proposals in to increase the weight placed 
on emissions. The total annual costs of buying and running cars were analysed by emissions 
bands. Cars in low emission bands are almost all in ‘basic’ or ‘small’ market segments and 
usually have low costs. Cars in high emission bands are in executive, sports, sports utility 
vehicle and luxury cars, and their costs are usually high. When set with the additional costs of 
paying London’s Congestion Charge, at present the cost for a low emission car is high as a 
share of the annual cost for the car while that for a high emission car is low as a share of the 
annual cost.  
 
Transport for London provided data from cameras monitoring the Congestion Charging Zone 
for ‘June 2007’ (specifically 21st May to 17th June). This records that 670,000 unique cars used 
the zone in June and these were captured making over 8.5 million journeys. Over 54% of these 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
cars were registered in London – and these made over 73% of journeys illustrating that the 
effect of the proposals would mostly be on cars registered in London. Cars that would be 
required to pay the higher charge account for over 16% of cars using the zone and 20% of 
captured journeys – they are above average users of the zone. Cars that would be entitled to a 
low CO2 discount account for 0.7% of cars using the zone and 1.5% of captured journeys – they 
are fewer but are also above average users of the zone. 
 
The proposals for Emissions Related Congestion Charging are likely to have five main effects 
on the market for cars in London: 
 
(i) 
The introduction of the low CO2 discount would currently benefit a low proportion of 
cars currently using the zone – less than 1%. From such a low base, this does offer the 
potential for Congestion Charging to provide an incentive for smaller low emission 
cars. Indeed, for new registrations in 2006, the share of cars that met the criteria was 
4.5% so the proportion of cars entitled to the low CO2 discount is certain to increase in 
coming years. 
 
(ii) 
The low CO2 discount also replaces the existing discount for alternative fuel cars. 
Around 0.8% of cars that travelled in the zone in June used this alternative fuel 
discount. Almost one third 30% of cars that currently travel in the zone with an 
alternative fuel discount would be entitled to simply transfer to the new low CO2 
discount. The remainder are either cars with higher CO2 emissions or predate the 
necessary criteria. 
 
(iii) 
The higher charge would affect cars that were registered after 2001 and are in high 
emissions bands (of VED band G or equivalent). This affects a relatively high share, 
over 13%, of cars using the zone. It is estimated that around a third of these cars are 
larger-medium cars or executive type cars of which motorists could choose alternative 
substitutes with lower emissions. A further third are sports utility vehicles in which 
there are some lower emission (often diesel) alternatives that some motorists may 
switch to with the appropriate incentive. However, a further third are premium priced 
sports cars or luxury cars of which the proposed higher charge would be only a small 
additional cost to the total. 
 
(iv) 
The higher charge would also affect cars that were registered before 2001 and have 
engine sizes larger than 3000cc. This would affect less than 3% of cars using the zone. 
The majority of these cars are ageing and their owner would be likely to look to replace 
them over the next few years and may choose smaller and/or lower emission substitutes. 
A higher charge is likely to accelerate the exit of some of these older cars from 
London’s parc. Others are older/classic sports cars and luxury cars and it is unlikely 
owners would substitute these because of the higher charge. 
 
(v) 
The proposal to withdraw the residents’ discount for high emission cars would be likely 
to cause a significant increase in costs for those residents who choose to continue to use 
high emission cars. Around 2% of cars currently using the zone have residents’ 
discounts but would be required to pay the higher charge. In 2006, a disproportionate 
share of new registrations located within the Congestion Charge Zone were for cars 
within band G and so have high emissions of CO2. It is likely that a reduction in new 
registrations of these cars in this part of London would affect the overall total. 
 


link to page 6
Final Report: 
 Emissions related charging – Impact on the vehicle market 
Introduction: The Research Process 
 
 
Experian Business Strategies (Experian) in partnership with the ESRC Centre for Business 
Relationships, Accountability, Sustainability and Society (BRASS)1 were commissioned to 
examine proposals to introduce Emissions Related Congestion Charging (ERCC), in which the 
level of the charge would depend on the level of emissions of carbon dioxide (CO2) from 
vehicles. 
 
We developed a programme of research which produced a series of evidence papers which 
assist in providing a robust evidence base to help understand the nature of the car market in 
London, and the context of wider changes and trends in the car market. This evidence base also 
underpins economic modelling that is being undertaken separately by Experian to assess the 
impacts on London’s car market of changes to London’s congestion charging. 
 
Figure 0.1: How the research was structured 
 
 
Below, we summarise the content of the evidence papers. This final report seeks to draw 
together the main findings from the evidence papers and consider what this means for proposals 
to Congestion Charging policy in London. 
 
1.  Evidence Paper 1: Analysis of Vehicle Market Datasets 
 
We undertook detailed analysis of vehicle market data to provide evidence of the car market in 
London, the parc of cars in London today and how the market in changing. Experian holds 
DVLA records of vehicles registered across the UK and within London – which provides data 
on the make-model, age, engine size, fuel type, location of registration and ownership of 
vehicles. The dataset is not 100% accurate as there are sometimes incomplete records and gaps, 
but this is the best available source for this type of research. Experian calibrated the records to 
match vehicles with their equivalent VED emissions bands from A through to G, and 
subsequently to market segments. This allowed us to present: 
•  An illustration of the total ‘vehicle parc’, i.e. every vehicle within the postal area of 
Greater London, as of the end of 2006. 
•  An illustration of the post-March 2001 parc, i.e. we can identify the VED emissions 
bands and equivalents of cars in London which were first registered after the date which 
the VED bands were introduced. 
                                                      
1 BRASS includes the Centre for Automotive Industry Research at Cardiff University. 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  An illustration of the pre-March 2001parc, i.e. we can look at engine sizes of 
registrations from before the VED emissions were introduced. 
•  An assessment of London’s car market in 2006, looking at new registrations by VED 
emissions bands and also by manufacturers and model type. 
 
We were also provided with headline data from Transport for London (TfL) on the cars using 
London’s Congestion Charging Zone in the June period of 21st May to 17th June 2007. This data 
is derived from the cameras enforcing and monitoring the area and provides a helpful indication 
of how the cars using the Congestion Charging Zone contrasts with London’s parc of cars 
overall. 
 
2.  Evidence Paper 2: Case Studies of Vehicle Emissions Policies 
 
We provided three detailed case studies, with contrasting ways in which public policy has 
sought to influence the vehicle market as a means to address the level of CO2 emissions and the 
lessons learned from these policies. These examined the opportunities and constraints of using 
legislation to reduce CO2 emissions from road transport sources. These case studies looked at: 
•  Policy from the European Union and how this developed from initial proposals of a 
carbon tax to establishing voluntary agreements with Europe’s car manufacturers to 
produce an industry average on CO2 emissions. This considered why the targets set by 
the voluntary agreement are unlikely to be met and examined the current proposals for 
mandatory targets. 
•  Legislation from California and how the State has a long history as the global leader in 
vehicle emissions policies. The type of intervention introduced in California has often 
provided a template for policy in Europe; and how the major manufacturers have 
responded in California has often shaped their product ranges in the rest of the world. 
•  Taxation on company cars in the UK and how since this was linked to CO2 emissions 
in 2002, appears to have had an impact on the market for new company cars. Company 
cars are a major determinant of the market in the UK for new cars – and so 
subsequently shape the market for used cars – this provides an important background 
for the context of the car market within London. 
 
3.  Evidence Paper 3: Future Directions in the Car Market 
 
We provided evidence of the future direction in the vehicle market through assessing the 
market, competing technologies and product development by leading automotive manufacturers 
and how this may shape future changes in CO2 emissions from cars. This provided context on 
how levels of CO2 from cars may change during the lifetime of the proposed scheme and 
beyond. This looked at: 
•  The pathways to reduce CO2 emissions whether through market changes which do not 
require any new technologies, whether design changes such as bringing lighter cars to 
the market and technology enhancements through alternative fuels and engines. 
•  The type of future competing technologies and considering how options such as hybrid-
engines and bio-fuels may emerge in the medium-term, that cars powered by fuel cells, 
batteries and gas-to-liquid may develop as much longer-term prospects; but that the 
internal combustion engine fuelled by petrol or diesel is likely to remain the dominant 
form of technology powering cars. 
•  The automotive industry’s response to a changing market through providing case 
studies of new electric car and battery powered cars – but also a study which shows how 
manufacturers of larger high CO2 emission cars may be most likely to push forward 
with innovation in technologies to reduce CO2. 


Final Report: 
 Emissions related charging – Impact on the vehicle market 

Context: Climate, carbon and cars 
 
 
 
 
The policy context of climate change 
 
This research into the proposed changes to Congestion Charging and the impacts on the vehicle 
market is set within the current policy context of the challenge of climate change and the 
resulting requirement to curb emissions of CO2.  
 
The UK Government’s policy on emissions of CO2 is set out in the 2007 Energy White Paper. 
The White Paper sets out a strategy to deliver energy security and accelerate the transition to a 
low carbon economy by saving energy, developing cleaner energy supplies and securing reliable 
energy supplies at prices set in competitive markets. Its targets for CO2 emissions are a 60% 
reduction in CO2 emissions by 2050, and a 26-32% reduction by 2020, against a 1990 baseline.  
 
In London in particular, the Mayor of London has set out his Climate Change Action Plan – 
Action Today to Protect Tomorrow – to use policy to conserve energy and minimise waste in 
London. One of the Action Plan’s three specific aims is to reduce London’s contribution to 
climate change by minimising emissions of carbon dioxide from all sectors through energy 
efficiency, combined heat and power, renewable energy and hydrogen.  
 
The rationale for these policies on CO2 emissions is underlined by the recent report from Sir 
Nicholas Stern, Head of the Government Economic Service, on the economics of climate 
change and development. The Stern Review on the Economics of Climate Change (2006) 
examined the evidence on the economic impacts of climate change and the economics of 
stabilising greenhouse gases in the atmosphere. It considered the policy changes involved in 
managing the transition to a low carbon economy. The conclusion of the review was that the 
benefits of strong, early action considerably outweigh the costs.  
 
The Stern Review reported that carbon emissions have already pushed up global temperatures 
by half a degree Celsius and if no action is taken on emissions then there is more than a 75% 
chance of global temperatures rising between two and three degrees Celsius over the next 50 
years. A two to three degree rise in temperatures could reduce global economic output by 3% of 
GDP. The review found that to stabilise emissions at manageable levels, emissions would need 
to stabilise in the next 20 years and fall between 1% and 3% after that, which would cost 1% of 
GDP. 
 
 
 
Cars and CO2 
 
Figures from the DTI show that in 2005, road transport accounted for 21% of total UK 
emissions of CO2. The data shows that road transport is a growing source of CO2 – in 1990 it 
accounted for 18% of all CO2 emissions and by 2020 it is expected to account for almost 27% 
of all CO2 emissions. 
 
The Mayor’s Climate Change Action Plan presents similar evidence specifically for London. 
This reports that London’s road transport currently involves up to 27 million trips per day, 
resulting in CO2 emissions of 9.6 million tonnes of per year, 22% of London’s total emissions. 
Private road transport, mostly cars with some motorcycles, accounts for around half of this. 
Therefore, around 11% of London’s CO2 emissions come from cars. 
 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
 
Therefore, road transport is a major and growing source of CO2 emissions. This means that if 
the UK generally and London in particular is to be successful in reducing, or even curbing the 
growth of, CO2 emissions then it is necessary to address CO2 as a result of car use. There are a 
number of broad approaches and combinations of approaches with which this is likely to be 
possible, for example: 
•  Reducing the number of cars and other vehicles on the roads 
•  Reducing the number of trips 
•  Reducing the distances travelled 
•  Reducing the levels of CO2 produced by each car or other vehicle 
 
In March 2001, the UK Government introduced reforms to Vehicle Excise Duty (VED), the 
road taxation paid each year by vehicle owners in the UK, to reflect CO2 emissions. This was a 
small step to influence the nature of the car market through a more progressive system in which 
new cars that emitted, on average, lower levels of CO2, would be charged a lower rate of VED 
than those cars which emitted, on average, higher levels of CO2. This saw the introduction of 
six “VED bands”. Cars with the lowest levels of CO2 (measured in terms of grams of CO2 
emitted in relation to kilometres travelled under test conditions) were VED band A. Cars with 
the highest levels of CO2 were in VED band F. In 2006, a new seventh VED band G was 
introduced for cars with the very highest levels of CO2. 
 
Figure 1.1: VED bands by CO2 g/km 
VED Band 
CO2 g/km 
Band A 
Up to 100 
Band B 
101 -120 
Band C 
121 - 150 
Band D 
151 - 165 
Band E 
166 - 185 
Band F 
186- 225 
Band G 
226+ 
Source: DVLA 
 
In this report, and for the purposes of Congestion Charging policy, all cars registered after 
March 2001 with CO2 emissions above 226g/km are classified as being equivalent to VED 
band G. Therefore, those cars identified as band F between March 2001 and March 2006 but 
with CO2 emissions above 225g/km are classified as band G. 
 
These VED bands only apply to cars registered after the reforms of March 2001. For cars 
registered before this date, the rate of VED is based on engine size. The rate of duty for cars 
with engine sizes above 1549cc is higher than that for cars with engine sizes not above 1549cc. 


Final Report: 
 Emissions related charging – Impact on the vehicle market 

Context: The national car market and 
the significance of London 
 
 
 
 
The national picture for cars 
 
The number of vehicles on Britain’s roads has increased substantially throughout the past 
decade. Figures from the Department for Transport report that the total number of vehicles 
increased from over 25 million in 1995/6 to almost 33 million by 2004/05 – an increase of 
almost 30%. Similarly, the number of licence holders grew from 30 million to 32 million, an 
increase of almost 7%. The number of vehicles is now greater than the number of licence 
holders. 
 
Figure 2.1: The context of cars in Great Britain 
 Great Britain  
1995/6 
2004/05 
Number of vehicles 
25.4m 
32.9m 
Number of licence holders  
30.2m 
32.2m 
Households with no car 
31% 
26% 
Households 2+ cars 
25% 
29% 
Source: Department for Transport 
 
One of the main changes in recent years has been the change in household ownership of cars. In 
particular: 
•  The decline in the number of households without a car. This fell from 31% of households in 
1995/6 to 26% in 2004/05. 
•  The rise in the number of households with two or more cars. This increased from 25% in 
1995/6 to 29% in 2004/05. 
Across Great Britain, there are now more households with two or more cars than there are with 
no cars. 
 
The London picture for cars 
 
London has a large car market which to some extent influences the shape of the car market for 
the country as a whole. The Department for Transport (DfT) Regional Transport Statistics 2006 
report that: 
•  There are around 3 million registered vehicles in London which amounts to approximately 
9% of around 31 million vehicles registered in Great Britain. 
•  There are 2.5 million cars registered in London, around 9.5% of over 26 million cars 
registered in Great Britain. 
•  Over 8% of all new car registrations in Great Britain are in London. In 2005, this 
represented around 200,000 new car registrations out of a national total of around 2.4 
million. 
 
The headline DfT regional statistics may underestimate total car registrations and new car 
registrations in London because of the effect of company cars which may be kept in London but 
registered at another location i.e. the location of the fleet operating or lease operating company. 
The DVLA data we present later in this report may produce higher total of cars chiefly because 
Experian have undertaken additional research to identify the actual location of these company 
cars. However, the headline DfT statistics effectively illustrate the point that the car market 
within London contributes significantly to the overall picture for the UK. 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
However, within London, the market for cars is different to that for Great Britain. The pattern of 
change is also different. The DfT reports that the total number of vehicles in London increased 
from 2.6 million in 1995/6 to 3 million in 2004/05. This is growth of 15% – but  it is half the 
rate of growth for Great Britain as a whole. 
 
In London, 41% of households do not have a car. This is much greater than the share of car-less 
households for Britain – and the share of households without a car is increasing i.e. this is the 
opposite trend to that for the rest of the country. The number of households in London with two 
or more cars is 19%. This is less than for the country as a whole and the share appears to have 
decreased little over the past ten years.  
 
Figure 2.2: The context of cars in London 
 London 
1995/6 
2004/05 
Number of vehicles 
2.6m 
3.0m 
 
 
 
  
1997/8 
2004/05 
Households with no car 
36% 
41% 
Households 2+ cars 
19% 
18% 
Source: Department for Transport 
 
 
 
 


Final Report: 
 Emissions related charging – Impact on the vehicle market 

Context: Emissions related Congestion 
Charging proposals 
 
 
 
 
The proposals for emissions related Congestion Charging 
 
The London Congestion Charge is a weekday charge that must be paid daily by the registered 
keeper of a vehicle that enters or travels within the congestion charging area in Central London. 
The Congestion Charge has had amendments and enhancements since its introduction: 
•  February 2003. Introduction of the original Congestion Charge Zone following the 
boundary of London’s “inner ring road”. The charge was £5.00 for trips in the zone on 
Monday to Friday (excluding public holidays) between 7am and 6.30pm. 
•  July 2005. The charge was increased to £8.00. 
•  February 2007. The Western Extension to the Zone was introduced, increasing significantly 
the area covered by Congestion Charging to include much of Kensington and Chelsea. In 
additions, the hours for Congestion Charging were reduced to between 7am and 6pm. 
 
The Mayor of London has proposed that he would like to take forward the policy of 
encouraging behavioural change in London by introducing emissions influenced charging to the 
London Congestion Charging Scheme. The aim is to discourage the use of the most CO2 
polluting cars in London and influence car purchasing behaviour in favour of cars with lower 
levels of CO2 emissions. 
 
Figure 3.1: Proposal for Emissions Influenced Charging to the London Congestion 
Charging Scheme 

Proposed 
Charge 
Eligibility 
Relating to post-March 
Charging Band 
2001 VED bands 
Low CO2 discount 
No charge 
Cars which emit up to 
This equates with VED 
120g/km CO2 and are Euro 
bands A and B that meet 
4 compliant. 
Euro 4 
 
 
Standard Charge 
£8.00 
1. Cars which emit 121-
This equates with VED 
225g/km CO2. 
bands C, D, E, F (which 
 
emit less than 226g/km of 
2. Cars which emit less 
CO2) and VED band B cars 
than 121g/km but are not 
that do not meet Euro 4. 
compliant to Euro 4 
 
 
3 Cars which were 
registered pre-March 2001 
and have engine sizes less 
than 3000cc 
 
Higher Charge 
£25.00 
1. Cars which emit more 
This equates with VED 
than 225g/km CO2 
band G and cars equivalent 
 
to VED band G. 
2. Cars which were 
 
registered before March 
2001 and have engine 
sizes of over 3000cc. 
 
Source: Transport for London 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
 
This would mean that cars with very low levels of CO2 emissions would pay nothing while 
those with very high levels would pay much more, at £25.00, than the standard £8.00 charge. 
The ranges reflect the latest DVLA VED bands. Although Band G was only introduced in 
March 2006 many cars registered before then have emission levels above 225g/km and so 
would also be considered to be subject to the higher charge. 
 
Discounts from Congestion Charging 
 
There are currently a range of Congestion Charging exemptions and discounts available to 
certain categories of drivers and certain categories of vehicles and individuals. Some of these 
would not be affected, for example: 
•  Vehicles such as buses, minibuses, taxis, minicabs, emergency service vehicles and 
motorcycles would continue to be exempt from the charge. 
•  Disabled people, or institutions for disabled people, who hold a Blue Badge would continue 
to have a 100% discount. 
 
However, some other Congestion Charging discounts would be affected. These are: 
•  Alternative fuel vehicles: that is cars which are powered by an alternative fuel and not 
solely by petrol or diesel, are currently entitled to a 100% discount. Under the proposals, 
only those alternative fuel cars with CO2 emissions of less than 120g/km and so in bands A 
and B (and compliant with the Euro 4 standard) would be eligible for the discount. 
Alternative fuel cars with higher emissions and therefore in bands C – F, or in band B but 
not compliant with Euro 4 would be liable for the standard charge and alternative fuel cars 
that are VED band G or equivalent would be liable for the higher charge. 
•  The Residents’ Discount: Residents living in the Congestion Charging Zone (or in some 
localities neighbouring the area) are presently entitled to a 90% discount on the Congestion 
Charge. Residents with cars in VED bands A or B (not Euro 4), C, D, E and F would 
continue to pay the discounted rate of 90% and those with cars in VED bands that meet the 
low CO2 discount criteria would receive the full discount. It is proposed that the Residents’ 
Discount would be withdrawn for those residents continuing to use band G equivalent cars. 
These would be required to pay the higher charge of £25. 
 
 
10 

Final Report: 
 Emissions related charging – Impact on the vehicle market 

Drivers of change: Costs and spending 
 
 
 
The change in cost of motoring 
 
The past ten years have been a decade in which the retail prices for new cars have scarcely 
changed. The ONS Consumer Price Index shows that new cars in 2006 were only fractionally 
more expensive than in 1996. Meanwhile, the price of used cars has fallen year-on-year. 
Consumers pay more than 30% less for used cars in 2006 than in 1996. In contrast the price of 
fuel for cars (i.e. petrol and diesel) has risen over the same period by over 30%. 
 
Figure 4.1: Consumer price changes in car related spending 
140
130
New cars
Used cars
120
Fuels
110
00
=1
05 
100
0
 2

CPI,
90
80
70
60
96
97
98
99
00
01
02
03
04
05
06
19
19
19
19
20
20
20
20
20
20
20
Source: ONS Consumer Price Index
 
 
This suggests that there is a rebalancing occurring in the costs of motoring. The cost of the 
actual car, whether new or used, is decreasing relative to the costs of running the cars such as 
fuel. This changes the economics of motoring. If purchasing costs are high relative to running 
costs, then this creates an incentive to use the car to make a journey. For example if a motorist 
chooses to leave the car at home and use public transport then the motorist is paying a high 
price for a car that is not being used. If, however, the purchasing cost is low relative to the 
running costs, then the motorist may be more likely to choose to leave the car at home; there is 
less of a cost to the motorist in not using the car. 
 
The change in spending on motoring 
 
The trend of the changing economics of motoring is supported by evidence of household 
spending on motoring in different household income groups. The ONS Family Spending Survey 
presents detailed household expenditure at the UK level by gross income decile groups i.e. the 
second decile group represents the lowest income 10-20% of households and the tenth decile 
group represents the highest income 10%. Spending on cars and motoring rises with household 
income. In 2006 the lowest income groups spent on average almost £13.00 per week on 
motoring – reflecting lower levels of car ownership. The sixth income decile group (the 50-60th 
percentage of households) spent over £52.00. In contrast the highest income group spent on 
average over £133.00 per week. 
 
Over 2002 to 2006, the average weekly spending among lower income groups on motoring 
scarcely changed. However, the balance of this motoring expenditure did change. The sixth 
decile group spent around £52.00 per week on motoring in both 2002 and 2006 – but in 2002, 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
over 50% of this was for purchasing the car; by 2006 just 43% was of the car and most spending 
was on fuel and additional motoring costs. Meanwhile, among the highest income groups, 
spending on motoring increased substantially with increasing amounts on purchasing the car. 
 
Figure 4.2: UK spending on cars by household income decile 
2006 
h
ile
c
oup
Tent
de
gr
2002 
2006 
th
e
p
ou
Eigh
decil
gr
2002 
2006 
th
ile
p
c
ou
Six
de
gr
2002 
h
2006 
ile
p
c
Purchase of new cars
e
ou
Fourt
d
gr
2002 
Purchase of second hand cars
Petrol, diesel etc
d
2006 
n
p
Additional motoring costs
o
ile
c
c
ou
Se
de
gr
2002 
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Household spending £s per week
 
Source: ONS Family Spending 2005/06 and ONS Family Spending 2001/02 
 
How spending in London is different 
 
In London, the context of spending on cars is very different to that in the UK as a whole. 
Regional data from the ONS Family Spending survey highlights that London residents on 
average spend less on car use, and more on public transport, compared to other regions in the 
UK. Figure 4.3 illustrates that in 2006 London households spent around £48 per week on 
motoring (£21 on cars, £13 on petrol, £8 on motor insurance and £6 on repairs and servicing) 
and £12 on public transport (£4 on trains and Underground, £2 on buses, £6 on other transport). 
 
These headline results are illustrative that car ownership and car use in many parts of London is 
comparably low; and that the use of public transport in London, for either work or leisure 
related travel, is a much more viable option than many other parts of the country. Recent levels 
of growth in the use of public transport in London, whether by buses or by rail, is an important 
driver of change in the future of car use in the city. 
 
Figure 4.3: London’s spending on cars and public transport 
60
Repairs and
 (£)
 servicing
50
re
Repairs and
Vehicle insurance
 servicing
penditu
40
Vehicle insurance
y e
Purchase of petrol, diesel 
le
k

and 
other motor oils
30
Purchase of petrol, diesel 
 wee
e

and 
g
other motor oils
era
20
Purchase of
eholds av
Purchase of 
cars or vans
us 10
cars or vans
Other travel and 
transport
Other travel and 
Ho
Bus and coach fares
transport
Bus and coach fares
Rail and tube fares
Rail and tube fares
0
London
UK
London
UK
Cars
Public transport
 
Source: ONS Family Spending 2005/06 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 

Drivers of change: Market change 
 
 
 
 
Changes in the market for cars affects the level of CO2 emissions without a specific need for 
technological change or new designs. The market for cars in the future is likely to be affected by 
such factors as consumer preferences for the types of cars they wish to drive, the running costs 
such as the price of fuel – and also by public policy which affects the cost of motoring whether 
through vehicle excise duty, taxation of company cars, taxation on fuel, or more innovative 
policies such as relating congestion charging or road pricing to the types of car being used. 
 
There are three principal ways in which the market may change which would reduce average 
CO2 emissions without the need for technological change: 
•  Adoption of diesel over petrol 
•  Segment shift toward smaller cars 
•  Segment innovation with new types of cars 
 
1. Adoption of diesel over petrol 
 
Diesel engines on average produce 20% fewer grams per kilometre of CO2 than their equivalent 
petrol cars. The market for diesel has increased. Figures from the DfT put diesel market 
penetration in the UK at over 30% compared to less than 20% in 2001. Figure 5.1 illustrates 
examples of the comparable CO2 emissions for variations of petrol and diesel cars.  
 
Figure 5.1: Examples comparing CO2 emissions of diesel and petrol cars 
Make Model 
Type 
Diesel 
Petrol 
CO2 g/km 
CO2 g/km 
BMW 
X83 Series 83 
3.0 
232 
248 
Land Rover 
Freelander 

224 
265 
Mercedes-Benz S 
Class 
320/350 
220 
242 
Toyota Avensis 
2.0 
146  191 
Peugeot 
307 1.6 
129 174 
Renault Clio 
1.4/1/5 
117 
158 
Ford Fiesta 
1.4 
 
119 145 
MINI Cooper 
R56 
118 139 
Source: Vehicle Certification Agency 
 
Diesel cars are potentially cleaner in terms of CO2 emissions than petrol cars mostly due to 
their greater fuel economy. However, diesel cars have different emission characteristics, and an 
increase in diesel cars at the expense of petrol cars would have other implications for emissions. 
Compared to petrol cars, diesels have higher emissions of nitrogen oxide and much higher 
emissions of particulate matter. Therefore, although a shift to diesel engines is likely to bring 
benefits in terms of CO2 emissions, it raises other concerns around urban air quality and health 
impacts. 
 
2. Segment shift 
 
The car market may change through “segment shift”. This occurs where manufacturers of high-
value, larger, and so relatively high emitting cars, look to expand the value of the brand into 
different market segments. This is a strategy that is being developed particularly by German 
based manufacturers whose product range is traditionally in the high value market segments of 
executive saloons or sports cars. For example: 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Mercedes have moved into making smaller cars with their “baby Benz”. The Mercedes 
Benz A-Class is a small family car, a three or five-door hatchback, introduced in 1997 and 
redesigned in 2004. The Mercedes-Benz B-Class is a compact car introduced in 2005, 
essentially as an enlarged A-Class. These cars marked a significant departure for Mercedes 
from its traditional prestige models. 
•  BMW retained the MINI following its sale of the Rover Group and developed this as a 
small but high-value car focusing on the city based market. This is widely seen as a sales 
success for BMW. 
•  Audi developed the Audi A2 ‘supermini’ and although sales were disappointing is moving 
to produce the Audi A1, as a supermini coupe to be launched in 2009. 
This means such companies are entering into competitive markets of small or lower medium 
cars, but seeking to retain their premium branding. 
 
3. Segment innovation 
 
Segment innovation involves the potential development of whole new types of market 
segments. There are innovations within existing market segments with preferences for 
alternative fuel types. For example, Toyota developed its range with the petrol hybrid Prius as 
did Honda with the petrol electric Civic. These represent the emergence of fuel technologies 
(reviewed separately) but they also point to the innovation of new market segments for 
motorists looking specifically for alternative fuel cars. 
 
Segment innovation also allows for new types of vehicles– for example vehicles that are 
somewhere between a motorcycle and a car. This is currently rare but examples include the 
“Tango”. The Tango is an ultra-narrow electric sports car, built by Commuter Cars, an 
American company. It is thinner than some motorcycles and is designed to carry one person 
although is capable of seating two. It only takes up a fraction of a standard parking space and is 
able to park sideways. This type of narrow bodied car, often running on electric power, already 
exists and their growth in popularity would mark a significant change in the market. 
 
Implications for Emissions Related Congestion Charging 
 
Each of these drivers of change in the car market has implications for the proposals for 
Congestion Charging in London: 
•  Motorists with band G and equivalent petrol cars with CO2 emissions of over 225g/km may 
look to shift to comparable diesel cars with CO2 emissions below 225g/km. There are 
several examples among these cars – such models of Land Rover, BMW and Mercedes in 
which there are diesel substitutes which would fall into band F and so result in a saving 
from Congestion Charging. There are also several examples of band C cars with CO2 
emissions of 120-150 g/km with equivalents in band B, for example types of Renault Clio, 
Ford Fiesta or MINI in which again there may be diesel substitutes that would enable 
savings from Congestion Charging. There is therefore potential for emissions related 
Congestion Charging to result in a shift to diesel cars. This would help reduce CO2 but 
could raise other issues around air quality in London. 
•  The changing market segments, both through segment shifts and segment innovation, offer 
opportunities for car manufacturers to respond to changing consumer needs. The 
introduction of emissions related Congestion Charging may conceivably encourage a 
demand from customers with brand loyalty to higher end car makers such as Mercedes, 
BMW and Audi for them to move into mid range market segments or to develop new 
segments based on new types of cars or fuel technologies. 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 

Drivers of change: New designs 
 
 
 
 
The level of CO2 emissions produced by cars is also likely to change as a result of new designs. 
This requires some design change in cars on the market, for example: 
•  Remapping of engines and powertrain 
•  Weight reduction 
 
1. Remapping of engines and powertrain 
 
It is highly probable that despite development of new technologies, conventional petrol and 
diesel fuels and conventional petrol and diesel powertrain will continue to dominate in new cars. 
At the same time, oil-derived fuels are likely to increase in cost and so the car industry is likely 
to enhance conventional internal combustion technologies. There are a number of developments 
that are likely to have the effect of keeping conventional internal combustion engines 
environmentally competitive. Table 6.1 highlights some of the more important of these. 
 
Figure 6.1: Likely improvements to internal combustion engines 
Technology Likely 
Leading players 
introduction 
Variable valve 
now Honda 
actuation 
Electronic valve 
2010 
Already available on some truck engines 
actuation 
Direct injection 
now 
Pioneered by Mitsubishi in 1990s (and Mercedes 300SL in 1950s),  
petrol engines (GDI) 
Cylinder switch off 
2010 
Already available on some US V8 engines (e.g. Cadillac) 
Stop-start 2006 
Available on some PSA cars 
Starter-generator now 
Citroen 
Variable 
? Saab 
compression 
Turbocharging and 
now Saab 
supercharging 
Improved 
now 
More efficient transmissions can enhance overall efficiency, often 
transmissions 
without more expensive engine technologies.) 
Source: BRASS 
 
Transmissions are also subject to rapid development as a whole powertrain approach is now 
needed; this can often avoid spending on more complex engine technologies. More and more 
control is being taken away from the driver, who is increasingly regarded as interfering with 
optimum (emissions) performance. Even manual transmissions will therefore become more 
automated even though at their core there is a conventional gearbox. Automatic transmissions 
have already enjoyed improvements which significantly reduce frictional losses, while other 
novel technologies in electronic control systems well established in Japan are likely to be 
increasingly seen in Europe, especially on small cars. 
 
2. Weight reduction 
 
Steel is still the main material used in vehicle manufacturing – around 70% of a vehicle’s 
weight is steel. The use of aluminium has also increased, mainly in engines, drive trains and 
chassis. It is estimated that a 10% weight reduction can improve fuel economy by between 4% 
and 8% and consequently reduce CO2 emissions. This depends on changes in the size of vehicle 
and also changes in engine size. There are a number of ways to achieve weight reduction. This 
includes: 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Switching from conventional steel to high strength steels. There are various types of 
high strength steel from relatively low strengths to hardened strengths. At present, the 
average usage of high strength steel in a vehicle is around 7% to 10% but is used more 
extensively in some new cars such as the Mercedes A-class. The international ULSAB-
AVC project (Ultra Light Steel Auto Body – Advanced Vehicle Concept) investigated 
intensive use of high strength steels and demonstrated this could reduce vehicle weight 
by around 20-30% for passenger cars.  
•  Replacing steel with lighter materials; for example metals such as aluminium or 
plastics. The use of plastics in vehicles has increased to about 8% of total vehicle 
weight but the growth rate of plastics content has been decreasing in recent years, 
possibly because of concerns over recycling.  The weight reduction potential for plastics 
is high, maybe as much as 60% for fibre-reinforce plastic which is commonly used in 
aviation. However, its application to cars has been limited due to its high cost and long 
processing times. 
 
While the amount of lighter materials in vehicles has increased over time, this has not always 
resulted in weight reductions or improved fuel economy. This is because lighter materials may 
also enable manufacturers to increase the size or the performance of the vehicle. The average 
weight of vehicles is estimated to have increased over the past ten years. This has been shaped 
by customer demand for safety and comfort; but also producers supplying new gadgets in cars 
to increase their selling potential on the market – but with the side-effect of increasing weight.  
 
Implications for Emissions Related Congestion Charging 
 
The development of new designs for cars, whether through remapping engines and powertrains 
or through reducing car weight with new designs or materials – implies that some CO2 
reductions are achievable without the need for alternative fuels to replace petrol or diesel. This 
offers some support to using policy to promote low emissions generally rather than target the 
development of alternative fuels. For example, offering discounts simply because a car runs off 
alternative fuel offers no incentive for motorists or car manufacturers to switch to redesigned or 
lighter cars. 
 
However, design improvements in engines and weight cannot be regarded as a simple solution 
to reducing CO2. For example, evidence from the Low Carbon Vehicle Partnership reports that 
the average weight of cars is becoming heavier – despite the increasing use of lighter materials. 
This suggests that the content of cars with electronics such as stereo sound systems, satellite 
navigation and air conditioning is adding to the overall weight. Therefore, even if the structure 
of cars becomes lighter, motorists may want to get more into their car which offsets the gains of 
weight reduction. This suggests the CO2 reduction requires additional incentives to shift the 
market in favour of lighter cars. It is possible that the reported weight increase in cars has 
levelled off and there may, with the appropriate incentives, be gradual reduction in average car 
weights over the coming years. 
 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 

Drivers of change: Fuel Technologies 
 
 
 
 
The automotive industry has several technology pathways that are under development and 
which will impact upon the level of CO2 emissions. The mix of technology and when it is 
introduced will depend upon the context of CO2 emissions policy and the markets of each 
vehicle manufacturer. Technological change will cause long-term changes in the market, in 
particular with development of alternative types of fuel and engines that are likely to move the 
market away from a dependence on oil-based petrol or diesel. The main technologies to 
consider are: 
•  Biofuels 
•  Gaseous fuels and Gas-to-liquid 
•  Hybrids 
•  Battery electric 
•  Fuel cells 
 
1. Biofuels 
 
Biofuel for cars can be defined as liquid or gas fuel derived from biomass – this is usually from 
agricultural products specifically grown for use as biofuel such as corn and soybeans, flaxseed 
and rapeseed, sugar cane and palm oil. There are two biofuels currently used for transport 
purposes – ethanol and biodiesel: 
•  Ethanol is made primarily by fermenting sugars produced by plants. It is produced in large 
quantities in Brazil from sugar cane and in the USA from corn. In Brazil, ethanol is widely 
used as car fuel although this situation, because of Brazil’s extensive sugar cane industry, 
would be difficult to repeat elsewhere in the world. 
•  Biodiesel is produced from a chemical reaction between vegetable or animal oil with 
ethanol or methanol. This has properties that are similar to diesel and its main advantage is 
its compatibility with conventional diesel but it has large disadvantages in terms of costs. 
 
The interest into biofuels for fuelling cars raises many issues around sustainability such as: 
•  The actual impact on CO2 reduction. The benefits of biofuel, especially that produced from 
corn, are believed to be mixed, depending on the agricultural processes used. 
•  The growth of biofuels would require agricultural intensification. This includes increasing 
use of pesticides and agrochemicals and/or an increasing need for agricultural land which 
would threaten biodiversity, in turn causing deforestation and the release of carbon. 
•  Concerns on the impacts of food supplies as switching to biofuels on a large scale would 
require considerable use of agricultural land which would crowd out food production. 
 
Biofuels may have some role to play in reducing carbon but their role is likely to remain small. 
Demand will be driven for some time by the EU Directive and growing public interest. 
However, it is likely to settle at a level determined by the regulation and mixed with fossil fuels 
for use in mainstream engines. 
 
2. Gaseous fuels and Gas-to-liquid 
 
Two gaseous fuels are currently used in road vehicles worldwide. Liquefied petroleum gas 
(LPG) is a mixture of hydrocarbon gases manufactured during the refining of crude oil. 
Compressed Natural Gas (CNG) is made by compressing methane extracted from natural gas. 
Both fuels have lower carbon content than petrol or diesel although fuel consumption tends to 
17 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
be slightly higher. The process of deriving CNG produces methane which is itself a greenhouse 
gas that is considered more damaging than CO2.  
 
Another option is turning natural gas into a liquid fuel that can be handled at normal 
temperatures. This GTL (gas-to-liquid) technology can produce a pure form of diesel which can 
make diesel cleaner. It allows the careful engineering of vehicle fuel, is more fuel efficient than 
oil and has lower carbon content. The product is currently available in its pure form in a number 
of countries and is blended with conventional diesel. Oil firms could introduce the fuel using the 
existing forecourt infrastructure. A Shell GTL refinery is coming on stream in Qatar during 
2007, which will greatly increase global capacity for this fuel. 
 
3. Hybrids 
 
Hybrid technology combines two fuel sources for a car’s powertrain. Toyota has made an 
impact in London with its Prius model – a petrol-electric hybrid. In typical urban stop-start 
driving, such powertrains give a CO2 emissions advantage. Several other manufacturers are also 
introducing or preparing hybrid vehicles. European manufacturers are following two 
development trajectories. The first involves stop-start systems that switch off the engine when 
the car is stationary and start it immediately when the car needs to move. The system can be 
introduced on many cars currently in production. These systems give many of the advantages of 
a hybrid – particularly in urban driving – at considerably lower cost. It may even be possible to 
retrofit some of these systems to existing cars. 
 
Another development is the diesel hybrid. This is thought to provide significant savings in fuel 
consumption as well as CO2 emissions compared even with a petrol-electric hybrid. However, 
its integration in a car with acceptable noise, vibration and harshness is challenging and costly. 
Diesel-electric hybrid technology is currently used on trains, heavy earth-moving equipment 
and some light-medium trucks and buses. It is proven technology but with some problems in 
integration into cars. There are various prototypes and PSA Peugeot Citroen has announced it 
will have a diesel-electric hybrid car available from 2010. 
 
4. Battery electric 
 
Battery electric cars use chemical energy stored in rechargeable battery packs, and electric 
motors and motor controllers. Products in this niche have combined electric conversions from 
mainstream producers (e.g. Peugeot) or dedicated vehicles by niche producers (e.g. Th!nk). The 
development of battery electric cars was encouraged through California’s zero-emissions 
mandate, which led to the development of electric cars such as the Tesla. Battery electric cars 
have become more viable in urban areas and their competitiveness is likely to grow further. 
 
The mainstream car industry has reservations about battery electric cars, perhaps because it 
undermines one of car the industry’s core technologies – the internal combustion engine. 
Smaller manufacturers are likely to develop more credible battery electric cars over the next few 
years. Mainstream car makers are unlikely to enter this area in significant numbers although 
Toyota in the USA has announced a ‘plug-in’ (mains rechargeable) version of some of its 
hybrid cars for launch in 2008 and GM’s Volt prototype is also a step in this direction as it is 
proposed as a mains rechargeable series-hybrid. Of course, a life-cycle or well-to-wheel 
approach means battery electric vehicles are not really zero emissions. These batteries require 
electricity generation which produces CO2 emissions as most power is generated using coal, oil 
or gas. 
 
5. Fuel cells 
 
A fuel cell allows energy conversion by producing electricity from external supplies of fuel. 
Fuel cell cars are often regarded as the answer to environmental concerns in auto-mobility. All 
18 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
that has so far emerged are a few prototypes even though the technology is progressing rapidly. 
In many respects the fuel cell car is already competitive with the internal combustion engine car 
– however, there are many challenges: 
•  Vehicle integration: Before the 1990s, a panel van was the smallest possible fuel cell 
vehicle as the system required so much room. The 1990s saw a rapid reduction in size and 
today’s experimental fuel cell vehicles look similar to conventional vehicles. However, the 
system continues to take-up too much space, for example the rear storage area. 
•  Material cost and availability: Fuel cells require platinum but this is scarce and reserves are 
likely to be stretched by expected production cars as platinum is also used in catalytic 
converters. The fuel cell industry and its suppliers are looking at ways of reducing this 
platinum dependency. 
•  Fuel supply: Most current automotive fuel cells run on pure hydrogen which needs to be 
extracted from water or from hydrocarbons – processes that require substantial energy. This 
means the total lifecycle impact of hydrogen in not necessarily environmentally optimal.  
On-board vehicle reforming of hydrogen is a possible future development but this would 
add weight and complexity to cars. 
•  Manufacturability: Manufacturers such as Ballard Power Systems are in early phases of 
establishing a process for producing automotive fuel cells. Forecasts envisage an 
incremental increase in annual production to reach a peak of around 1 million a year by 
2015. However, with the total number of vehicles forecast to exceed 75 million units by 
2015, fuel cells would remain only a small fraction of new vehicles. 
•  Infrastructure: The use of fuel cells would mean a need to replace or replicate the existing 
fuel supply infrastructure with a hydrogen version. This is likely to be highly costly. Few 
fuel cell vehicles would be sold without a sufficient fuelling infrastructure, while no 
commercial organisation would build an infrastructure without relative certainty of demand. 
An alternative approach is that hydrogen would not need to be distributed in the way that 
petrol or diesel is today but with on-board reforming systems – but this would instead add to 
the cost and complexity of cars. 
 
Timeline 
 
The combined effect of technological changes in the vehicle market point in our view to a future 
timeline as presented in figure 7.1. 
 
Figure 7.1 Estimated UK Fuel/Powertrain mix 2010-2025 (%) 
 
Source: BRASS estimates 
 
Petrol and diesel engines with internal combustion engines are likely to remain the main form of 
technology in new cars – but this will weaken from around 90% of new cars in 2010 to about 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
80% in 2015 and 66% by 2020. This is a significant decline in the dominance of petrol/diesel 
engines which leaves scope for new technologies. Of these new technologies: 
•  Gas to liquid (GTL options) are likely to emerge more significantly from 2010 and reach 
around 10% of market share by 2015 and over 13% by 2020. 
•  Hybrid technologies are likely to have a longer lead time but perhaps reaching up to 5% by 
2020. 
•  Biofuels are likely to play a significant role in the short-term, perhaps over 5% as soon as 
2010 but this is likely to slow, reaching 12% by 2020. 
•  Fuel cells and battery vehicles are a much longer timeframe, remaining marginal at less than 
1% by 2020 but then increase beyond this point. 
 
Implications for Emissions Related Congestion Charging 
 
There is a range of new fuel technologies emerging on the market which will widen the choice 
for motorists in London. Recent years have seen a number of cars with hybrid engines and 
battery electric emerge on to the market. Many of these are specifically designed and marketed 
as cars for urban driving and so have taken a foothold within London’s market. It is likely that 
the existing alternative fuel discount for London’s Congestion Charging has supported this. For 
example, we estimate from DVLA data of sales of new cars that in 2006, over a third of new 
registrations for the hybrid electric Toyota Prius in the UK were within London. 
 
Simply because a car is “alternative fuel” does not mean it is low emission. For example the 
hybrid-electric version of the Lexus is not in the lowest CO2 emission bands. Moreover, while 
alternatives such as bio-fuels and battery cars are likely to result in lower CO2 emissions from 
cars, a broader ‘well to wheel’ approach suggests that the production of bio-fuels and electricity 
supplies are likely to generate CO2 and other emissions. 
 
The development of alternative fuels as a solution to reducing CO2 emissions is a long-term 
process. While the market is seeing the emergence of hybrids, electrics and bio-fuels they are 
currently only a small share of the total market and this is likely to remain so; while other 
development such as gas-to-liquid are even longer term prospects. As the petrol/diesel internal 
combustion engine is likely to remain the dominant form for powering cars, a policy that 
encourages more efficient use of these cars is likely to be a more effective means of meeting 
CO2 objectives. This favours a view that public policy should promote low CO2 levels rather 
than favour specific alternative fuels. 
 
 
 
 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 

Policy intervention: The EU 
 
 
 
History of EU policy in road transport emissions 
 
At the Rio Summit in 1992, the European Union established a target of stabilising CO2 
emissions at 1990 levels by the year 2000, with reductions thereafter. The EU proposed Carbon 
Tax of the mid-1990s can be understood as a policy initiative to meet these commitments. 
 
The road transport sector is one of the main areas showing growth in CO2 emissions. The 
European Commission estimated in the mid-1990s that, under a business as usual scenario, CO2 
emissions from cars would grow by about 20% by the year 2000, and 36% by 2010 from 1990 
levels. It was in this context that in 1996 the first EU Carbon Tax on cars was proposed. 
 
The principle of the proposed EU Carbon Tax was that cars which had fuel consumption over a 
specified target would be penalised by an extra purchase tax while those with better 
performance would benefit from a tax reduction. This would provide a clear economic incentive 
for consumers to reduce demand for less fuel efficient vehicles. It was proposed that the Carbon 
Tax would be sensitive to different size or weight classes of vehicle, so avoiding a direct attack 
on makers of larger cars, although larger powerful heavier cars would be penalised more than 
small cars. The main features of the proposals were: 
•  The performance target would have to be met by 2005. 
•  A CO2 reference standard to be incorporated into the vehicle type-approval procedures. 
•  Fiscal incentives for vehicles with CO2 emissions below the reference standard. 
•  Links to other policy measures e.g. reduction in car use. 
•  Proposed scrapping incentives to remove older cars from circulation. 
•  A refusal to allow fuel efficiency measures to compromise safety standards. 
•  A recognition of the need for any proposed policy to be equitable in social terms. 
 
However, many of the details of the proposal were never decided and within the proposals lay a 
risk that certain European car manufacturers would be penalised, especially those in the market 
for larger cars including Volvo, Mercedes, Porsche, Jaguar, Audi, Saab, and BMW. It was also 
unclear if this tax would be sufficient to achieve aggregate fuel economy targets. 
 
Therefore, an alternative approach was developed in which the car industry agreed voluntary 
targets with the European Commission in 1997. This helped to avoid outright regulation, new 
taxation, and potential problems with European Governments, particular vehicle manufacturers 
and pro-car consumer organisations. In contrast with the initial proposals, the eventual 
voluntary agreement was weak. Its main principle was that the industry as a whole should reach 
a figure of 140g/km of CO2 emissions for new car sales by 2008. There were no penalties for 
non-compliance and no targeting of those models or manufacturers that produced high CO2 
emissions. 
 
By mid-2003, the European Vehicle Manufacturers Association (ACEA) reported that the 
industry as a whole was unlikely to meet EU targets for the reduction of CO2 from cars. Despite 
progress in introducing more efficient engines, vehicle manufacturers with sales in Europe are 
not going to achieve an average CO2 emissions performance of 140 g/km by the required date 
in 2008.  
 
ACEA reports that the level of average per car CO2 emissions declined from 174 g/km in 1999 
to 165 g/km by 2002 and 160 g/km by 2005 for ACEA members. At this rate of progress, by 
2008 the industry average will at best reach 150g/km with a target of 120 g/km by 2012 being 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
improbable. Much of the early fall in average CO2 emissions can be attributed to the growth in 
the market share of diesel engines and for this reason further improvements were always going 
to be much more challenging. 
 
Therefore, the main reasons for vehicle manufacturers in the EU being unable to meet the 
requirements of the voluntary agreement are: 
•  More efficient engines are being placed into larger and heavier cars with the market’s 
emphasis on cars’ acceleration and speed rather than fuel economy. Car manufacturers 
claim consumers are demanding large SUVs, MPVs and sports cars. 
•  The overall balance of the car market has changed with a greater proportion of sales in the 
relatively high-CO2 emitting segments such as SUVs and MPVs. Across Europe as a whole 
the segments most in decline are mid-range vehicles, especially family saloons. 
•  There is also a drift upwards in size and weight of cars within market segments. For 
example, a leading mid-sized car such the Volkswagen Golf has increased in size and 
weight over different generations of the model. 
 
Current developments in EU policy 
 
The EU Voluntary Agreement would inevitably face problems if, or indeed when, the industry 
fails to meet the targets. This now poses a challenge for the European Commission because it 
has to devise a mechanism to reduce CO2 emissions without: 
•  Unfairly penalising specific vehicle manufacturers 
•  Reducing or distorting consumer choice by precluding certain types of vehicle or segment 
•  Transgressing Member State priorities and policies on vehicle taxation 
•  Precluding any particular technology or fuel choices. 
 
The task is to devise an approach that shifts downwards the overall curve of fuel consumption 
and CO2 emissions. This raises fundamental dilemmas. For example, small cars are generally 
held to produce less CO2 per kilometre. However, the demand for such cars tends to be the most 
sensitive to price; while for manufacturers they are the cars with the lowest profit margins. 
Whatever measures are introduced at the EU level then there will be some type of market 
impact. The European Commission could be accused of distorting the market; although the car 
market is already distorted by various policies of national governments. 
 
In February 2007, the European Commission launched a public consultation on proposals to 
reduce CO2 emissions cars and light-commercial vehicles. The Commission announced that it 
would: “...pursue an integrated approach with a view to reaching the EU objective of 120 g/km 
CO2 by 2012. This can be achieved through a combination of EU and Member States action. 
The Commission will propose a legislative framework, if possible in 2007 and at latest by mid- 
2008, to achieve the EU objective of 120 g/km CO2, focusing on mandatory reductions of the 
emissions of CO2 to reach the objective of 130 g/km for the average new car fleet by means of 
improvements in vehicle motor technology, and a further reduction of 10 g/km of CO2, or 
equivalent if technically necessary, by other technological improvements and by an increased 
use of bio-fuels” 
 
However, Europe’s vehicle manufacturing association, ACEA, has criticised the proposals from 
the Commission and in June 2007, ACEA members agreed a response. ACEA argues that: 
•  The proposed timescales for an average of 120g/km CO2 emissions by 2012 are unrealistic 
•  The proposals place the burden for reducing CO2 mostly on the car industry – this is 
considered costly and could add an average of €2,500 to the cost of a new car. This in turn 
will lead to a diminished level of vehicle manufacturing in Europe with costs to jobs and 
Europe’s economy 
•  CO2 emissions from new cars have already significantly decreased over the past ten years 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Any future reduction target should not be an industry average but must differentiate 
between manufacturers according to the average weight of their model range, with makers 
of smaller cars subject to tighter targets than those making larger ones 
•  Car makers should also be able to average any individual target across their range, so that 
improvements to one model can compensate for increases in others 
•  The majority of CO2 emissions from cars in Europe is caused by a combination of the 
existing and ageing car fleet, by growing congestion and increasing mileage and that a more 
“integrated approach to cutting CO2 emissions” is required.  
 
 
Implications for Emissions Related Congestion Charging 
 
The developments at the EU level set the broad context for developments in the car market for 
the UK. Almost all cars on the UK’s roads are manufactured within the Europe Union with the 
leading manufacturers having plants established across European countries. Therefore, any 
agreement – or disagreement – between ACEA and the European Commission will have direct 
implications for the future parc of cars in London. However, as this is an ongoing consultation 
process then we cannot state with certainty what these implications will be. 
 
If we envisage a scenario in which ACEA agrees to, and/or the EU enforces its proposals then it 
is likely that making cars that comply would not be impossible nor prohibitively expensive. 
There are already cars on the market that meet these requirements and there are many car 
models just above the 140g/km limit which with some technical improvements could comply 
with the lower limits. This would mean a substantial increase in the number of cars on the 
market with CO2 emissions of less than 120g/km and which would be entitled to a Low CO2 
discount for London’s Congestion Charging. This may in turn increase the number of cars 
actually travelling in central London. TfL would keep the impacts of emissions related 
Congestion Charging under review and, if necessary, bring forward changes to the scheme. 
These could include, for example, amending the discount rate or the eligibility criteria. 
 
The main challenge under this scenario would be for heavy and high performance cars. Here 
technical measures – some very expensive – would be needed to make them anywhere near 
compliant. Advanced powertrain (e.g. hybrids), alternative fuels and weight reduction would 
need to be used to substantially reduce their CO2 emissions. The implication is likely to see a 
polarising market developing between smaller cars similar to those available today; and larger 
cars with significantly increased technology but at a cost more expensive than their equivalents 
today. These improvements would be likely to push many high emission cars below 225g/km of 
CO2 and so be eligible for the standard charge rather than the higher charge. 
 
Therefore, under the scenario of agreement or enforcement at an EU wide level then we could 
expect to see more band A/B cars on the market and fewer high band G cars within the next four 
to five years. This would therefore complement the impact of emissions related Congestion 
Charging. However, under a scenario in which there is not an EU wide agreement, then this 
would place more importance on meeting policy objectives for CO2 reduction at a national and 
regional level – giving scope for Congestion Charging to influence the market. 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 

Policy Intervention: California 
legislation 
 
 
 
History of California legislation in road transport emissions 
 
Nearly all modern environmental regulation of motor vehicles can be traced back to initiatives 
in the State of California. As early as the 1950s, air quality issues in California had reached a 
stage where action was felt to be needed even though little was then known about how vehicle 
emissions could contribute to smog formation. The California Air Resources Board (CARB) 
was established and mandated the introduction of “positive crankcase ventilation” from 1963. 
This was subsequently introduced in Europe in 1971 and set a precedent for legislation in 
California to shape legislation in Europe. 
 
The car industry in the US; namely the big three of GM, Ford and Chrysler; have resisted 
California’s environmental measures. It is the Japanese car makers with a strong position in the 
US market such as Toyota and Honda that adapted quickly to new regulations – and this is 
reflected in the market leadership of these manufacturers in lower-emission cars today. Some 
European car makers with a significant share of their sales in the US, such as Volvo, BMW and 
Mercedes also adapted to new regulations. As a result, these manufacturers offered ‘catalytic 
converters’ in the European market, several years before this was necessary. 
 
By 1990, emissions from US new cars had been cleaned up to a considerable extent. But air 
quality in California’s urban areas was not improving as had been hoped. This was partly due to 
the increasing numbers of vehicles which negated the improvement in per-vehicle emissions. 
CARB introduced new standards for California which created pioneering vehicle categories: the 
Transitional Low Emission Vehicle (TLEV), Low Emission Vehicle (LEV), Ultra-low Emission 
Vehicle (ULEV), and Zero Emission Vehicle (ZEV). The California ZEV mandate required at 
least 2% of new cars sold in the state in 1998 to be zero-emissions. This was to promote battery 
electric vehicles which are zero emissions at point of use (if not zero emissions overall). 
 
The ZEV requirements were eventually weakened, partly in response to intense lobbying from 
the car industry and oil industries.  The ZEV requirement was finally abandoned in 2005 
although many elements of the original proposals remain, including the emissions categories of 
ULE). The legislation also continues to set a technological trajectory informed by the need to 
move from conventional mechanical towards electric powertrain in some form. This is required 
for the main clean candidate technologies currently under consideration including hybrid 
electric vehicles and fuel cell electric vehicles. 
 
In September 2006, California took another step with the Global Warming Solutions Act. The 
legislation granted CARB powers to set regulations and enforcement for a 25% reduction in 
greenhouse gas emissions by 2020. This legislation is highly significant and is likely to be 
followed by other US states that opt to adopt California type regulation. More recently, the State 
of California has taken one further step: it is suing six leading auto makers under “nuisance 
law” for causing damage to water supplies, coastline, forests, wildlife and health. The car 
industry is likely to base its defence on a cost-benefit analysis, for example arguing that the 
benefits their products bring to Californians outweigh the impact on the environment. 
 
Research into impacts of California legislation 
 
California has paid particular attention to the cost and benefits of its legislation to address 
emissions. The importance of assessing the impact of such regulation established is necessary to 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
underpin future regulation but also to establish rules in the American legal system. A series of 
studies were conducted at the Institute of Transportation Studies, University of California 
during 2004 to assess the financial cost of California Air Emissions Regulations.  
 
The total cost of environmental compliance can be divided into what is borne by the producers, 
the car manufacturer, and what is passed on to the consumer, the motorist. The car manufacturer 
must invest to meet the regulation with R&D, equipment and marketing. The studies reported 
that car manufacturers were able to absorb the cost of emissions control equipment immediately 
and then in the subsequent years able to pass two thirds of that cost to the motorist. 
 
It is also suggested that compliance costs diminish over time. The initial costs after the new 
regulation are normally the highest since firms do not have much time to properly adapt to the 
required measures. These costs fall over time as the manufacturer is able to redesign product 
and the investment costs are distributed over a longer period of time. The reasons for such cost 
and price reductions can be summarised as: 
•  Recovery of development costs in the initial production phase 
•  Hedging against lower future demand than eventually realised 
•  Tooling up for mass production whereby initial high tooling costs are recouped on initial 
production runs 
•  Product improvement and development costs are much lower than initial R&D 
•  Increasing competition has a depressing effect on prices realisable in the market 
 
The research estimates that the regulatory requirements in California have added 12.5% to 20% 
onto the final price of the product to the consumer – but it has shown that this type of 
“technology forcing” can work with Californian regulation and lead to cleaner cars using: 
•  Conventional technology  
•  More radical technologies needed to make hybrids and possible future fuel cell vehicles. 
It is also evident that environmental technologies are beginning to be used as a competitive tool. 
Toyota has consistently shown market leadership in this. PSA Peugeot Citroen has also recently 
led in the German market by offering particulate traps. Other car manufacturers may now also 
recognise the possibilities offered by the CO2 reduction agenda and the California-inspired (but 
Japanese car maker led) drive into hybrid and fuel cell technologies. 
 
Implications for Emissions Related Congestion Charging 
 
The global multinational nature of vehicle manufacturing means that legislative developments 
in California filter through to shape the car market in the UK and in London. It was the response 
of car manufacturers to Californian legislation, in particular Japanese-based corporations such 
as Toyota and Honda, with helped to bring hybrid-electric cars to the market. For example, the 
Toyota Prius was marketed in California from 2001 as an Ultra-low Emission Vehicle (ULEV) 
and one tenth of all its worldwide sales to date have been in California – thereby underpinning 
the market viability for this type of car as it was rolled out into Europe. We can expect that as 
car manufacturers respond to the latest legislation in California – with the focus now on hybrid 
development rather than battery electric cars then this will point to a greater choice of lower 
CO2 emission cars emerging in the London market over the next few years. 
 
However, the policy implications from California are very different to the approach suggested in 
London. The Californian approach has been to shape the supply of the car market by enforcing 
manufacturers to introduce certain types of car to the market. Manufacturers have had to invest 
or face the costly risk losing the right to sell their cars in the State. The proposals in London are 
to redefine the demand for cars by changing the costs faced by the motorist.  
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
10  Policy intervention: Company car 
taxation in the UK 
 
 
 
 
The UK company car market 
 
The company car market as a proportion of the total new car market is highly significant in the 
UK. Around half of all new car sales are company car sales. Therefore, the type of cars in total 
circulation in the UK is strongly influenced by company car sales. Private fleets usually retain 
cars for around 36 months (much less than the average private new car of around 60 months) – 
then the company car will usually be sold on the private used car mar market. 
 
Company car fleets include those that are specifically needed for employees to perform their 
jobs, while others are essentially a ‘perk’ in lieu of salary. Typically, sales for private fleets 
have enjoyed price discounts related to the volume of vehicles purchased and are almost 
exclusively for new cars. Some companies have large fleets, in particular those which buy and 
then lease to third parties. There is therefore an attraction to develop policy towards fleet cars 
rather than the more difficult private retail sector – if major fleet purchases can be influenced by 
policy it is a quick and effective means of achieving policy aims. 
 
The fleet market has a large proportion of ‘benefit in kind’ cars which means that employees 
have historically not been exposed to the full cost of purchase and use. This may, for example, 
include the provision of insurance, road tax, servicing and expenses of fuel. The effect of this 
has been a tendency for company cars to be larger than new cars sold through private retail, 
meaning that the overall parc of cars has developed as less fuel-efficient than would otherwise 
have been the case. 
 
 
UK company car taxation 
 
From April 2002, a reform of company car tax was introduced. The ‘benefit in kind’ charge for 
company cars is now calculated as a percentage of the car's price and linked to CO2 emissions. 
A summary table of the company car taxation system for petrol cars is presented in figure 10.1. 
The minimum charge is 10% of the car list price and the maximum charge is 35%. Diesel cars 
are subject to a further 3% surcharge and this charge will also be limited to 35%. 
 
Using DVLA data held by Experian we have sought to illustrate the impact of the change in 
taxation on company cars following its immediate introduction in 2002. We have focused on 
UK company car sales by estimated VED equivalents in 2000 as this was a year shortly before 
the new system was introduced and also before companies would have been likely to pre-empt a 
change in the taxation regime , and in 2003, the year in which the revised taxation system would 
have fully taken effect. This is shown in figure 10.2. 
 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
Figure 10.1: CO2 Emissions and Benefit in Kind Tax, from 2002 
CO2 emissions (grams per Kilometre) 
Tax % of 
Car Price
 
2005/06 -
2002/03 
2003/04 
2004/05 
  
2007/08 
n/a n/a n/a n/a  10 
165 155 145 140  15 
170 160 150 145  16 
175 165 155 150  17 
180 170 160 155  18 
185 175 165 160  19 
190 180 170 165  20 
195 185 175 170  21 
200 190 180 175  22 
205 195 185 180  23 
210 200 190 185  24 
215 205 195 190  25 
220 210 200 195  26 
225 215 205 200  27 
230 220 210 205  28 
235 225 215 210  29 
240 230 220 215  30 
245 235 225 220  31 
250 240 230 225  32 
255 245 235 230  33 
260 250 240 235  34 
265 255 245 240  35 
Source: SMMT 2007 
 
Figure 10.2: UK sales of new company cars by VED equivalents 
 2000 
2003 
VED Band 
(Equivalent) Number % 
share Number % 
share 
B 600 
0.1 
2,500 
0.3 
C 105,500 
12.7 
130,100 
16.7 
D 96,700 
11.6 
103,300 
13.3 
E 259,900 
31.3 
263,800 
33.9 
F 334,100 
40.2 
249,100 
32.0 
G 34,000 
4.1 
29,200 
3.8 
Total 830,700 
100 
778,000 
100 
Source: Experian from DVLA 
 
In 2000, before the change in company car taxation, there were over 830,000 company cars sold 
in the UK. In 2003, there were fewer than 780,000. This may reflect taxation changes although 
the total figure is also influenced by wider economic change such as a slowdown in economic 
growth over this period. However, in terms of VED band equivalents, the pattern of the 
company car market appears to have shifted and this is likely to be influenced by the taxation 
changes: 
•  Band G equivalents represented only 4% of new company cars in 2000 – but this had 
reduced by 2003. These cars, with CO2 emissions of over 225g/km were taxed in 2002 at 
27-35% of the car price. 
•  New company cars in band B were almost negligible in 2000 and had remained small 
though experienced growth by 2003. These cars, with CO2 emissions of up to 120g/km 
were taxed in 2002 at 10% of the car price. 
•  Within the ‘mid-range’ bands that make up 96% of new company car sales there was a clear 
shift away from band F which fell from 40% to 32%. The cars at around 186-225g/km of 
CO2 were taxed in 2002 at 10% to 27% of the car price. 
•  This reduction in sales of company cars in band F appears to have contributed to an increase 
in sales spread across bands E, taxed at 15-19%, and also bands D and C which at less than 
165g/km of CO2 were both taxed at 10% – the same as band B. 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
Therefore, the main impact of the company car taxation system in 2002 appears to have been a 
disincentive for company cars in band F – and generated incentives for company car drivers to 
shift to bands E, D and C. It did not have such a significant impact among the band G equivalent 
cars with the highest CO2 emissions as these were, and continue to be, only a small share of 
company cars. The new system did not create incentives to shift to cars with the lowest CO2 
emissions in band B – largely as the tax rates compare with those for bands C and D but also 
because there were simply fewer band B options at this time. 
 
However, by addressing the company car sector – representing more than half of new car 
registrations – the Government has helped to enable change in the new car market in favour of 
lower CO2 emissions. Furthermore, as ex-company car sales represent an important source of 
used cars for the private market, this measure has a wider longer term effect. 
 
Evaluation of reform in company car taxation 
 
The case study of company cars provides a practical UK example in which taxation was used to 
adjust behaviour in the choice of car used by company car drivers specifically in relation to CO2 
emissions. HM Revenue & Customs (HMRC) conducted an evaluation in 2006 looking at the 
effects of the company car tax reforms of 2002. Some of the main findings from this evaluation 
are: 
•  The total number of company cars had reduced to around 1.2 million in 2005 compared 
with around 1.6 million in 2001. The company car tax reform is a major reason for this. 
•  There was a substantial increase in company cars running on diesel to around 50–60% at the 
end of 2004 from around 33% in 2002. 
•  Survey results suggest that 60% of company car drivers who were given a choice of car 
were influenced by the tax reform and chose cars with lower CO2 emissions. 
•  The reform is believed to have led to reductions in CO2 emissions from company cars –it is 
estimated that CO2 emissions from company cars were around 15g/km lower in 2004 than 
if the reform had not taken place. 
•  The evaluation work also suggests that if drivers no longer have company cars, on average, 
they will choose private cars with CO2 emissions figures that are around 5g/km higher. 
 
The evidence on company cars illustrates that a change in motoring costs related to CO2 
emissions was effective in influencing car choices. It appears to have achieved this in two ways: 
(i) 
By contributing to a shift away from company car ownership. The reforms led to a 
rebalancing in the relative costs of using a company car and a private car. This led to a 
fall in the number of company cars and it is likely that this shaped an overall reduction 
in the number of new car registrations over recent years. The effect of this shift away 
from company cars on CO2 emissions is ambiguous: if drivers switch to private cars 
they are exposed the full purchasing and running costs which should favour a small fuel 
efficient car; but the HMRC evaluations suggests former company car drivers switch to 
private cars with higher CO2 emissions – this may suggest former company car drivers 
switched to older/larger cars. 
(ii) 
By contributing to a choice of company car with lower CO2 emissions. The reform 
successfully reduced the average CO2 emissions of company cars. This is supported by 
the HMRC evaluation and the results presented in figure 10.2. It appears that this may 
partly reflect a substitution towards diesel cars which may offer tax saving through 
lower CO2 despite being subject to a further surcharge. 
 
There is no existing evaluation of the effect the reform of company car taxation has had on the 
market for used cars. However, given that up to half of new car sales are of company cars and 
assuming that company car fleets are retained for an average of 36 months, then it is likely that 
the UK market for new company cars in 2003 shaped the market for used cars in 2006. 
 
28 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
Implications for Emissions Related Congestion Charging 
 
Company car tax reform provides evidence that motorists are sensitive to price changes and that 
public policies can impact on the market. Emissions related Congestion Charging would be a 
pricing mechanism that complements existing taxation regimes – both for company car taxation 
and vehicle excise duty. 
 
A less certain implication for emissions related Congestion Charging is that one of the main 
areas in which charging could have been expected to have an impact – on the emissions of 
company cars that travel in the Congestion Charging Zone – is likely to be limited. Existing 
taxation policy has already shifted the distribution of company cars away from VED band G and 
into lower emissions bands. Emissions related Congestion Charging would strengthen the 
existing structure of company car taxation, for example by providing a further incentive for 
companies with car fleets that use the zone to use cars that are not affected by the higher charge. 
However, it is unlikely that there is a significant number or share of company cars that would be 
exposed to the higher charge. Band G cars are much more likely to be concentrated in private 
ownership in which owners may have already been willing to pay higher purchasing and 
running costs associated with band G. 
 
 
29 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
11  London’s market: The total vehicle parc 
 
 
DVLA data and London’s vehicle parc 
 
The analysis of London’s vehicle parc is derived from DVLA data held by Experian Business 
Strategies. The data for the total vehicle parc is for 2006 Q4 and in London. This shows us that 
in 2006 Q4 there were a total of just over 3 million vehicles registered in London. By vehicles, 
this includes cars, light-goods vehicles such as vans, and vehicles such as taxis. It does not 
include larger heavy goods vehicles or buses. 
 
The ownership of these 3 million vehicles is mostly private. The DVLA data records that some 
2.5 million (83%) are privately owned and over 200,000 (7%) have “other owners”. The ‘other’ 
classification is where current ownership is unclear or unknown to the DVLA and we can 
assume most of this consists of privately owned cars i.e. 2.7 million vehicles (90%) are private. 
This leaves 300,000 vehicles (10%) as owned by companies. 
 
The age of vehicles registered in London spans over a century of motoring with vehicles dating 
back to 1900. Figure 11.1 illustrates the age of vehicles in London in 2006 by the year in which 
they were first registered. Less than 2% of vehicles in London, around 60,000, pre-date 1986. 
There are a little over 53,000 vehicles in London that were registered over 1986 to 1988, around 
1.7%. This suggests a scale of attrition in that by the time a vehicle is 20 years old it is unlikely 
to be on London’s roads. The number of vehicles by year of first registration increases for each 
year up until 2001, rising form almost 11,000 registered in 1986 to almost 250,000 registered in 
2001. The number of vehicles registered after 2001 begins to decline each year until 2005 when 
184,000 of London’s vehicles were registered 
 
Figure 11.1: London’s vehicles by year of registration 
300000
250000
200000
s
f car
150000
er o
b
m
Nu

100000
50000
0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
1900-1985
Source: Experian from DVLA data
Year of registration
 
 
The key date from the perspective of the proposed changes to Congestion Charging is March 
2001. This is when the VED emission bands came into effect. There are 249,000 vehicles in 
London that were registered in 2001. Some 29,000 of these were registered in January or 
February 2001, then 220,000 for the rest of the year. 
 
Therefore, 58% of London’s vehicles, some 1.77 million, pre-date the introduction of the VED 
emission bands. We refer to these as older vehicles. This means that 42% of London’s vehicles 
(some 1.26 million) were vehicles that were registered after the introduction of the new VED 
regime of emission bands. 
30 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
Identifying cars from commercial vehicles 
 
Experian undertook further analysis to disaggregate “cars” from “commercial vehicles” within 
the vehicle dataset. This is necessary because commercial light goods vehicles and trade 
vehicles are treated separately in terms of national vehicle excise duty – they are required to pay 
standard excise duty which is not related to VED bands for CO2. 
 
Therefore, we filtered these vehicles from the dataset so the analysis could focus on cars. This 
includes light goods vehicles not over 3,500kg in weight such as a small, medium or large size 
van or pick-up truck. This includes a broad range of vehicles such as those by specific 
commercial vehicle manufacturers such as DAF, LDV and Iveco and by commercial models; 
from other manufacturers such as the Ford Transit, Volkswagen Caddy, Mercedes Sprinter, 
Renault Kangoo or Vauxhall Combo to name just a few; and specifically designed taxis such as 
those produced by London Taxis or Metrocab. It is estimated that there are over 200,000 such 
commercial vehicles registered in London, almost 7% of London’s total vehicles.  
 
This leaves over 2.8 million cars (including estimates for company cars) registered in London. 
Over 1.66 million of these cars, 59%, were registered before March 2001 and 1.17 million cars, 
41%, registered after March 2001. The overall picture of London’s vehicle parc is presented in 
figure 11.2. 
 
Figure 11.2: Overall picture of London’s vehicle parc, 2006 
% of total 
% of total 
 Total 
vehicles 
cars 
 
 
 
 
Total vehicles 
3,041,000 
100.0 
 
 
 
 
 
Total cars 
2,835,000 
93.2 
100.0 
Total commercial 
206,000 
6.8 
 
 
 
 
 
Pre-March 2001 vehicles 
1,771,000 
58.2 
 
 
 
 
 
Pre-March 2001 cars 
1,665,000 
54.7 
58.7 
Less than 1500cc 
556,000 
18.3 
19.6 
1500-2000cc 852,000 
28.0 
30.0 
2000-2500cc 130,000 
4.3 
4.6 
2500-3000cc 67,000 
2.2 
2.3 
Over 3000cc 
62,000 
2.0 
2.2 
Pre-2001 commercial 
106,000 
3.5 
 
 
 
 
 
Post-March 2001 vehicles 
1,270,000 
41.8 
 
 
 
 
 
Post-March 2001 cars 1,170,000 
38.5 
41.3 
B (Euro 4) and A 
12,000 
0.4 
0.4 
B (not Euro 4) 
9,000 
0.3 
0.3 
C 239,000 
7.9 
8.4 
D 225,000 
7.4 
7.9 
E 202,000 
6.6 
7.1 
F (equivalents) 
244,000 
8.0 
8.6 
G (equivalents) 
137,000 
4.5 
4.8 
Cars with unidentified VED bands 
102,000 
3.4 
3.6 
Post-2001 commercial 
100,000 
3.3 
 
 
 
 
 
Source: Experian from DVLA data 
31 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
12  London’s market: The parc of cars pre 
and post-March 2001 
 
 
 
London’s post-March 2001 cars 
 
DVLA data held by Experian tells us that the number of post-March 2001 cars registered in 
London is 1.17 million. For these cars we can we can mostly apply the VED bands required for 
emissions related policy. The VED band G was not formally introduced until March 2006 
although we can consider band G “equivalents” for cars after March 2001. 
 
We can identify the VED band for a total of 1.07 million cars – over 91% of post-March 2001 
cars. However, this means there are some 100,000 post-March 2001 cars for which we cannot 
identify the VED band: 
•  There are some cars that are unidentified models. For example, within the DVLA dataset, a 
car may be recorded simply as Ford, Vauxhall, Toyota, Peugeot etc. Its precise model and 
description is unknown which means we are unable to identify what the car is or what VED 
band it belongs to. 
•  There is also a small selection of cars that are imported directly by the owner. This includes 
examples of cars from large manufacturers such as Opel, it includes sports cars produced by 
companies like Ferrari or Maserati; but it also includes electric cars such as those 
manufactured by REVA. 
It is not possible to provide the precise totals or proportions from these groups and the nature of 
the dataset means that a large number of cars are simply unidentified.  
 
Therefore, there are 1.07 million cars in London that are registered after March 2001 and for 
which we can assess the VED bands A to G (or G equivalents) for those registered before 
March 2006. The counts of these cars by VED band are shown in figure 12.1. 
 
Figure 12.1: London’s matched younger cars by VED band 
300000
250000
 cars 200000
150000
100000
mber of matched
Nu

50000
0
A+B4
B (minus B4)
C
D
E
F
G
Source: Experian from DVLA data
 
 
 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
The large majority of these cars are within the ‘mid-range’ VED bands C to F. The largest 
number of cars, some 240,000, is in band F. Band F cars have relatively high emissions but they 
would not be required to pay a higher charge. Band E has over 200,000 cars, band D represents 
over 225,000 cars, and there are up to 240,000 cars in band C. 
 
The number of post March 2001 cars in band G (or G equivalent) is over 135,000. The number 
of post March 2001 cars in band B is over 21,000. Among these 21,000 band B cars, a little 
under 9,000 are compliant to Euro 3 but not to Euro 4. Over 12,000 band B cars are compliant 
with Euro 4. There are scarcely any cars in band A. This means that only 1% of younger cars in 
London would be eligible for the low CO2 discount. 
 
London’s pre-March 2001 cars 
 
Experian used DVLA data to estimate that the number of post-March 2001 registered in London 
is 1.67 million. For these older cars we can we cannot apply the VED bands required for 
emissions related policy.  
 
The ownership of pre-March 2001 cars in London is overwhelmingly private. Just 80,000 (5%) 
are owned by companies. This demonstrates a contrast with post-March 2001 cars in which up 
to 18% are owned by companies. 
 
Over 50 % of cars registered pre-March 2001 had an engine size of between 1500-1999cc, that 
is over 850,000 cars. Those with an engine size of between less than 1500cc made up 33%. 
Therefore around three quarters of older cars still registered in London in 2006 had an engine 
size of less than 1999cc. 
 
Figure 12.2: London’s pre-2001 cars by engine size 
900000
800000
700000
600000
rs
a
f c 
500000
 o
er
400000
m
Nu 
300000
200000
100000
0
Less than 1499cc
1500-1999cc
2000-2499cc
2500-2999cc
Over 3000cc
Engine size
 
Source: Experian from DVLA data 
 
The provisional proposals for changes to Congestion Charging are that the higher charge would 
apply to older pre-2001 cars with an engine size of over 3000cc. Almost 4% of pre-2001 cars, 
almost 62,000, had an engine size of over 3000 cc. There is a further 4% of pre-2001 cars, 
around 67,000, with an engine size of 2500-2999cc. 
 
Experian’s automotive analysts undertook further work to match older pre-2001 cars with VED 
equivalents. The analysts were able to model VED equivalents for around 930,000 cars (55%) 
which left over 730,000 cars that cannot be equated with a VED band. 
33 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
Among those older cars that can be matched, Experian analysts were are able to identify 
matches for 9,500 “band G equivalent” older pre-2001 cars. This would suggest that a little over 
10% of older cars (i.e. 9,500 of 930,000 matched cars) are equivalent to band G. We could 
expect this share to be an underestimate if we allow for higher average emissions of CO2 
among older cars; however it provides a baseline estimate. 
 
Further analysis of the estimated band G equivalents explored a possible relationship with 
engine size. This suggests that many of the band G equivalents have engine sizes of 1500-
1999cc or 2000-2499cc. Only a minority have engine sizes of above 3000cc. This is shown in 
figure 12.3. This infers that a large share of older cars that are actually high in CO2 emissions 
would be exempt from the higher charge because the engine size is below 3000cc. 
 
Figure 12.3: London’s pre-2001 “Band G equivalent” cars by engine size 
50
45
40
35
 equivalents
30
nd G
a

25
20
15
10
 share of pre 2001 b
%

5
0
1500-1999 cc
2000-2499 cc
2500-2999 cc
> 3000 cc
Source: Experian, modelled from DVLA data
 
 
 
34 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
13  London’s market: New cars in 2006 
 
 
 
 
New car registrations by VED band 
 
DVLA data held by Experian allows us to undertake detailed analysis of the latest picture of the 
car market in London, i.e. the number of ‘new’ first time registrations, in 2006. The data records 
a total of over 190,000 new vehicle registrations in London. This includes over 148,000 car 
registrations for which we can identify the VED band. We estimate that there are over 10,000 
unknown cars that cannot be matched either because their full make and model is not identified 
or they are direct imports. 
 
Here we provide a snapshot of London’s 148,000 new cars in 2006 by identified VED band. 
This is illustrated in figure 13.1: 
•  Band B had over 6,600 registrations, 4.5% of the total. Over 6,400 of these band B cars 
(97%) were compliant with Euro 4. It appears that car manufacturers were prepared to meet 
the new Euro standards well in advance of the deadline January 2007. 
•  Band C had over 38,000 registrations, 26% of the total, making this the largest VED group 
among London’s new registrations. 
•  Band D had 33,000 registrations, 22% of the total, making this the second largest group. 
•  Band E had almost 27,000 registrations, 18% of the total. 
•  Band F had almost 28,000 registrations, 19% of the total. 
•  Band G had over 15,000 registrations – this is 10% of new registrations in London. New 
registrations of band G cars were more than double those for band B. 
 
Figure 13.1: London’s 2006 registrations by VED band 
45000
40000
35000
s
n

30000
25000
gistratio
f re 20000
 o
15000
mber
Nu 
10000
5000
0
B
C
D
E
F
G
 
Source: Experian from DVLA data 
 
Some 55% of new car registrations in London were with private owners; 45% were with 
companies. However, we can also identify distinctive patterns of ownership by VED band as 
presented in figure 13.2. For example: 
•  In band G, 71% were for private owners. This is the largest share of private ownership, and 
conversely the lowest share of company ownership, 29%, for any VED band. 
•  In band B, of 6,600 registrations, 63% were for private owners. This is the second largest 
share of private ownership, and conversely the second lowest share of company ownership. 
•  The middle bands of D and E have the largest share of company ownership of cars at around 
half of new car registrations.  
35 


Final Report: 
 Emissions related charging – Impact on the vehicle market 
Figure 13.3: London’s 2006 registrations by VED band and ownership, % 
 Private/other 
 
Company 
B 63 
37 
C 54 
46 
D 49 
51 
E 51 
49 
F 57 
43 
G 71 
29 
Total 55  45 
Source: Experian from DVLA data 
 
New car registrations by make of car 
 
The market for new cars in 2006 also allows us to provide analysis of the role of different car 
manufacturers within London’s car market in 2006. Cars registered in London span some 50 
manufacturers. Figure 13.4 shows those which featured in the ‘top eight’ for each VED bands.  
 
Figure 13.4: London’s 2006 car registrations by VED band and manufacturers, % 
 
Source: Experian from DVLA data 
 
 
 
36 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
The data is for those cars for which we know the VED bands so some manufacturers may be a 
little under-represented because they have a higher proportion of unmatched vehicles. However, 
this illustrates how manufacturers have a different presence across the VED bands and so would 
be differently affected by policies to change London’s car market. For example: 
•  Almost two thirds of new car registrations in London are through a few leading 
manufacturers. This overall market is largely shaped by sales of cars within the mid-range 
VED bands of C to F. 
•  Among new band B cars that would be entitled to a low CO2 discount, there is currently 
only a narrow range of manufacturers and models. Toyota, Ford and Peugeot have the 
largest presence in this group with the introduction of new Toyota’s hybrid-electric cars and 
small engine city cars. 
•  Among band G cars – the manufacturers that are present are very different to those within 
band B. This includes the manufacturers that specialise in prestige or larger cars such as 
Mercedes, Landrover and BMW. 
 
37 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
14  London’s market: Recent trends 
 
 
 
 
Recent trends by VED band 
 
Experian automotive analysts explored the nature of the market for new car registrations in 
London over the years 2001 to 2006. This showed that the number of new registrations in 
London had been in decline. There were over 200,000 new registrations in 2001 but this had 
fallen almost as low as 130,000 in 2005. This recovered to 148,000 in 2006 but this is still 
below the number of new registrations recorded a few years previously. 
 
Figure 14.1: New car registrations in London 2001-2006 by VED band 
250000
200000
ions 150000
istrat
100000
New reg
50000
0
2001
2002
2003
2004
2005
2006
B
C
D
E
F
G
 
Source: Experian from DVLA data 
 
These new registrations over 2001 to 2006 can also be approximated by VED emissions bands. 
These estimates suggest that share of new registrations by bands has remained largely consistent 
in London. The share for band G (and equivalent) cars appears to have peaked in 2003 and 2004 
and fallen back slightly since then while the share of band F cars has decreased steadily in 
favour of cars in bands E and D, as shown in figure 14.1. 
 
Recent trends by car market segment 
 
However, this analysis of recent trends is more insightful in that Experian’s automotive analysts 
matched new registrations with vehicle market segments from the Society of Motor 
Manufacturers (SMMT). This analysis of market segments in London tells us that: 
•  Basic cars represent around 1.5-2% of new registrations each year 
•  Small cars are consistently the largest market segment in London at around 33% of new 
registrations 
•  Lower medium cars are consistently the second largest market segment in London at around 
28-30% of new registrations. 
•  Upper medium cars have diminished as a share of London’s car market falling from around 
18% of new registrations in 2001 to 14% in 2006 
•  Executive cars have also diminished as a share of the market in London, steadily falling 
from over 7% of new registration in 2001 to 6% in 2006 
•  Sports cars consistently average around 4% of London’s market 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Sports utility vehicles represented only 6% of London’s new registrations in 2001 but this 
had climbed to 10% in 2004 – falling a little to 9% by 2006 
•  New registrations of luxury cars have held steady in London and so the share has climbed 
from just 1% in 2001 to 2% in 2006. 
 
Figure 14.2: New car registrations in London 2001-2006 by market segments 
250000
200000
Luxury
Sports Utility
tions 150000
Sports
istra
Executive
 reg 100000
ew
Upper Medium
N
Lower Medium
50000
Small
Basic
0
2001
2002
2003
2004
2005
2006
 
Source: Experian from DVLA data and SMMT 
 
The trends points to a slight shift in the market for new cars in London. In the context of an 
overall decline in new registrations, this decline is most acute in upper medium and executive 
cars. This has coincided with an increasing share of new registrations for sport utility vehicles 
and for luxury cars. 
 
These trends are important in the context of VED emissions bands: 
•  The “basic” market segment is that in which cars in VED band B are most likely to be 
found. However, most basic cars are currently in band C which suggests there is scope for 
this “basic” market to move into the lowest VED bands. The “small” market segment, 
which has the largest market share, is mostly in bands C and D and so also has potential to 
move into lower bands. 
•  The declining “upper medium” and “executive” car segments are both characterised by cars 
in band F. In recent years an increasing share are in band E. 
•  The growth in the market for “Sport Utility Vehicles” and for “luxury cars” has helped 
sustain a market for cars that are in band G. 
 
39 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
15 Congestion Charging: Understanding 
the costs of motoring 
 
 
 
The choice of car 
 
When a driver chooses which car they wish to purchase and/or drive, there are a number of 
factors that shape that choice, including the attributes of the car such as safety, comfort, and 
style. Survey work commissioned by TfL on motorists’ behaviour in London provides examples 
of the most important and second most important factors that motorists consider when 
purchasing a car. This is shown in figure 15.1. At present, the level of CO2 emissions is a minor 
factor influencing the choice of car compared to size, running costs and safety – although it is 
not a factor that is ignored. The objective of emissions related Congestion Charging is to 
increase the weight placed on CO2 emissions as informing the choice of car. 
 
Figure 15.1: Most important factors when purchasing a car 
Most 
2nd Most 
 
Important  Important 
Purchase price 
40% 
18% 
Size (e.g. boot, seats, doors) 
18% 
13% 
Running costs 
15% 
20% 
Fuel consumption 
7% 
14% 
Safety 7% 
6% 
Fuel type (e.g. petrol, diesel, LPG) 
4% 
15% 
Image and appearance 
4% 
3% 
Emissions 3% 
8% 
Brand name 
2% 
1% 
Performance/power 1% 
2% 
Other 1% 
1% 
Source: TfL Behavioural Survey 2007 
 
Illustrating the costs of motoring 
 
Experian analysts explored the costs of purchasing and running types of new cars to identify the 
relative annual costs of motoring across the range of VED emissions bands. Data on the 
motoring costs of purchasing, excise duty, fuel, insurance and servicing was drawn from What 
Car and the Vehicle Certification Agency. Data was collated on a sample of up to 100 cars and 
examples of the makes and models of cars for which data was used are shown in figure 15.2. 
 
Figure 15.2: Example of new cars by VED band used in cost sampling 
VED 
% 2006 
Key makes and models 
band 
register 
Toyota Prius, Aygo; Ford Fiesta Zetec, Fusion; Peugeot 
B 5 
107 Urban 
Ford Fiesta; Fiat Punto; VW Jetta; Toyota Yaris; Vauxhall 
C 26 
Corsa 

22 
Ford Focus, Mondeo; Renault Clio; Peugeot 207; VW Golf 

18 
Peugeot 307; Vauxhall Zafira; VW Golf 

19 
Ford Mondeo; VW Sharan; Mercedes Kompressor 
Land Rover Rangerover; Porsche Cayman; Mercedes M-
G 10 
Class, S-Class; Bentley Continental 
Total 100 
 
40 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
The results of the calculations for average annual costs are presented in figure 15.3. This 
consists of: 
•  The annual “purchase” cost. This is the current market price for a new car minus its 
expected resale price in three years, divided by three to provide an annual figure. Larger 
higher priced cars are typically in higher VED bands. However, the purchase costs of these 
cars are often reduced by their resale value – after three years they may be resold for as 
much as 50% of their original price while many lower priced cars depreciate at a faster rate. 
•  The annual “vehicle excise” cost. VED bands ensure a relatively progressive scale for the 
annual level of vehicle excise duty. Cars in band B are required to pay only £35 each year 
and this rises to up to £300 for cars in band G. 
•  The annual costs of “fuel” are based on an average of 12,000 miles each year. This is not 
adjusted to reflect different driving conditions or whether cars in different bands are likely 
to be used for different annual distances. 
•  The annual costs of “insurance”. This insurance in specifically in relation to the car and so 
does not reflect other factors that may shape insurance such as the age and gender of the 
driver or where the car is kept. 
•  The annual costs of “servicing” and maintenance. This is based on average annual servicing 
costs over the first three years of a car’s life. 
 
Figure 15.3: Average annual costs of cars by VED band (£s) 
VED 
Vehicle 
Total Annual 
band Purchase Excise Fuel Insurance 
Servicing  Costs 
B 2030 35 800 300  240 
3405 
C 2070 115 980  320 
230 
3715 
D 3030 140 1110 370 
200 
4850 
E 3200 165 1290 410 
230 
5295 
F 4000 205 1390 460 
250 
6305 
G 7170 300 1900 700 
330 
10400 
Source: Experian from What Car? and VCA 
 
This clearly shows that cars in higher bands tend to have much higher annual costs. The average 
total annual cost of purchasing and running a car in band G is three times that of a car that is 
band B. However, the annual costs of cars in higher bands are much more likely to be costs that 
are already ‘sunk’ costs i.e. they are within the purchase price. The more variable running costs, 
mostly fuel but also insurance and servicing, are a much lower share of the total costs among 
higher priced cars. This is shown in figure 15.4. When running costs are low relative to 
purchasing costs, then there is a likely implication of a greater incentive to drive. 
 
Figure 15.4: % share of total annual costs of cars by VED band 
VED 
Vehicle 
Total Annual 
band Purchase Excise Fuel Insurance 
Servicing  Costs 
B 59.6 1.0 23.5 8.8 
7.0 
100.0 
C 55.7 3.1 26.4 8.6 
6.2 
100.0 
D 62.5 2.9 22.9 7.6 
4.1 
100.0 
E 60.4 3.1 24.4 7.7 
4.3 
100.0 
F 63.4 3.3 22.0 7.3 
4.0 
100.0 
G 68.9 2.9 18.3 6.7 
3.2 
100.0 
Source: Experian from What Car? and VCA 
 
 
41 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
16  Congestion Charging: Impacts on the 
cost to motoring 
 
 
 
The additional effects of Congestion Charging 
 
Congestion Charging provides a cost to motoring for those cars which drive through the 
Congestion Charging zone. The extent to which Congestion Charging is an additional cost of 
motoring is sensitive to the frequency of which it needs to be paid. For simplicity this is 
presented as 50 days per year, 100 days per year, and ‘heavy-users’ of 200 days per year who 
use the Congestion Charging zone most weekdays. 
 
Figure 16.1 shows the estimates of annual Congestion Charging costs in relation to total annual 
motoring costs under the current charging system. This broadly assumes that all cars entering 
the zone pay £8.00 (e.g. no adjustment for any alternative fuel discounts). This demonstrates 
that Congestion Charging is not a trivial addition to annual motoring costs; even for relatively 
low use it is a more significant cost to motoring than vehicle excise duty. Under the current 
system, the share of Congestion Charging as part of annual costs appears to disadvantage cars in 
lower emissions bands. Taking a usage of 100 days as an example, then the charge adds 8% to 
the annual cost of a band G car but adds up to 23% to the annual costs of a car in band B or C. 
 
Figure 16.1: Current Congestion Charging as addition to annual costs by VED band (£s) 
VED 
Annual 
Congestion  50 days 
100 days 
200 days 
Band 
Costs 
Charge 
CC Cost 

CC Cost 

CC Cost 

B 3405  8 
400 
12
800 
23
1600 
47 
C 3715  8 
400 
11
800 
22
1600 
43 
D 4850  8 
400 

800 
16
1600 
33 
E 5295  8 
400 

800 
15
1600 
30 
F 6305  8 
400 

800 
13
1600 
25 
G  10400 

400 4 800 8 1600 
15 
Source: Experian 
 
Figure 16.2 shows the estimates of annual Congestion Charging costs in relation to total annual 
motoring costs under the proposed emission related charging system. This assumes that all new 
band B cars are entitled to the low CO2 discount and new band G cars pay a higher charge. 
 
Figure 16.2: Proposed Emissions-related Congestion Charging as addition to annual 
costs by VED band (£s) 

VED 
Annual 
Congestion 
50 days 
100 days 
200 days 
Band 
Costs 
Charge 
CC Cost 

CC Cost 

CC Cost 

B  3405  0 
0 0 0 0 0 0 
C 3715  8 
400 
11
800 
22
1600 
43 
D 4850  8 
400 

800 
16
1600 
33 
E 5295  8 
400 

800 
15
1600 
30 
F 6305  8 
400 

800 
13
1600 
25 
G 10400  25 
1250 
12
2500 
24
5000 
48 
Source: Experian 
 
 
The effects of these changes are, as anticipated, to favour the use of band B cars through 
ensuring no additional costs and to disadvantage band G cars through greatly increasing the 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
additional cost. Using 100 days as an example, then the charge now adds 24% to the annual cost 
of a band G car. This provides incentives in favour of band F in which the additional cost would 
be only 13%. There are disincentives to band C cars with additional costs of 22% which means 
motorists could favour a switch to band B. 
 
Other additional costs 
 
There are other additional costs to motoring in London. In particular: 
•  Costs to parking in Central London. It is likely that most cars entering the Congestion 
Charging Zone may then wish to park and so incur a further cost. There is no standard 
parking rate in central London – this varies by location and time of day. However, our 
research estimated an average parking cost in public car parks of around £4.70 per hour. 
This implies a 2 hour stay results in a parking fee greater than the cost of the standard 
Congestion Charge. 
•  Costs of residential parking in London. Few residential properties in Central London have 
allocated parking places or driveways – those which do may command a large premium in 
the property price. Almost all of London’s boroughs have introduced systems of parking 
permits for residents with costs of over £100 each year in Central London. Some boroughs 
have introduced permit discounts for electric or ‘eco-friendly’ cars. Richmond-upon-
Thames in outer London is the first to directly relate the cots of permits to VED bands. 
43 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
17  Congestion Charging: Cars travelling in 
the zone 
 
 
Cars using the Congestion Charging zone 
 
Transport for London provided camera monitoring data on the cars which use London’s 
Congestion Charging Zone. The most recent data available is for the period of June 2007. This 
records that almost 670,000 “unique” cars travelled in the Congestion Charging zone – unique 
cars mean that a car could have travelled in the zone multiple times throughout the month. The 
data also records the number of “captures” which is the number of journeys made into or within 
the zone. This records over 8.5 million such captures, meaning, for example, that each car on 
average made 12.7 days journeys into the zone. This camera monitoring data enables a specific 
picture to be built up of the types of cars using the Congestion Charging Zone and how this may 
be affected by proposals for emissions related charging. 
 
Figure 17.1: Cars using the Congestion Charging zone by age, engine size and emissions 
band 

Captures 
Proposed 
 
Cars  % 
share Captures % 
share  per car 
charge 
 
 
 
 
 
 
 
Total Cars 
670,000 100.0 8,527,000 100.0 
12.7 
 
 
 
 
 
 
 
 
Pre-March 2001 Cars 
246,000 36.7 2,671,000 31.3 
10.9 
 
Less than 2000cc 
186,000 
27.8 1,877,000 22.0 10.1 £8.00 
2000cc - 2,500cc 
14,900 
2.2 335,000 3.9  22.6  £8.00 
2500cc - 2999cc 
26500 
4.0 
187,000 
2.2 
7.1 
£8.00 
Over 3000cc 
18,700 
2.8 
271,000 3.2  14.5 £25.00 
Unknown 
0 0.0 0 0.0 
10.9 
£8.00 
 
 
 
 
 
 
 
Post-March 2001 Cars 
424,000 63.3 5,857,000 68.7 
13.8 
 
B(Euro 4) & A 
4,500 
0.7 124,000 1.5  27.3  £0.00 
B (not Euro 4) 
6,200 
0.9 104,000 1.2  16.7  £8.00 
C 76,000 
11.3 
754,000 8.8  9.9  £8.00 
D 74,900 
11.2 
769,000 9.0  10.3  £8.00 
E 69,300 
10.3 
953,000 11.2  13.7  £8.00 
F 100,000 
14.9 
1,663,000 19.5 
16.6  £8.00 
G 90,400 
13.5 
1,448,000 17.0 
16.0  £25.00 
Unidentified 2,600 
0.4 
43,000 0.5  16.3 £8.00 
Source: TfL Camera Monitoring, June 2007 
Note: The results reported through Camera Monitoring change each month. The figures for June 
2007 were the latest at the time of analysis but may differ with results presented in other consultation 
documents. 

 
The main headlines to be taken from the camera monitoring data of cars travelling in the 
Congestion Charging zone are that:  
•  For cars registered post-March 2001 
o  Almost 63% of cars registered post-March 2001. This means that cars in the 
Congestion Charging Zone tend to be newer than in the London market overall and 
the VED bands can often be identified. 
o  Almost 69% of captures are of cars are registered post-March 2001. This means that 
newer cars are likely to use the zone more frequently. 
o  However, this still means that up to 37% of cars are older cars that pre date March 
2001 and so their VED band cannot be identified.  
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  For cars that would be entitled to the low CO2 discount because they are post-March 2001 
and in VED band A or B and Euro 4 compliant 
o  Only 4,500 such cars travelled in the zone over this period, 0.7% of cars in the 
zone. VED band A accounts for fewer than 30 cars 
o  There were up to 124,000 captures for such cars. This is 1.7% of captures. 
o  This demonstrates that these low CO2 emission cars are the type of car currently 
most likely to use the zone often with an average of 27.3 captures per car 
•  For cars that would be required to pay the higher charge of £25.00 because they are post-
March 2001 and are VED bands G or equivalent 
o  Over 90,000 such cars travelled in the zone over this period, around 13.5% of cars 
travelling in the zone 
o  There were up to 1.45 million captures for such cars, 17% of captures 
o  This demonstrates that these high CO2 emission cars are also more likely to use the 
zone frequently with an average of 16 captures per car 
•  For cars that would be required to pay the higher charge of £25.00 because they are pre-
March 2001 but have engine sizes of over 3000cc 
o  Almost 19,000 such cars travelled in the zone over this period, 2.8% of cars 
travelling in the zone 
o  There were up to 270,000 captures, 3.2% of captures in the zone 
o  This demonstrates that these cars are slightly more likely to use the zone with 
relative frequency with an average of 16 captures per car. 
 
The Congestion Charging Zone and the London parc 
 
Camera monitoring data also provides an indication of the postal area in which cars using the 
Congestion Charging Zone are registered. Of the 670,000 unique cars using the zone in June, 
over 54% were registered within London although many cars such as company cars that are kept 
and driven in London may be registered with a fleet or leasehold company located elsewhere. 
Figure 17.2 presents headline findings of where cars using the zone are registered.  
 
Figure 17.2: Cars using the Congestion Charging Zone by postal region 
Cars  
Captures 
Captures 
Location 
% share 
% share 
per car 
 
 
 
 
Total 100 
100 
12.7 
 
 
 
 
London 
 
54.4 73.3 17.1 
Inner London 
39 
61 
19.7 
Outer 
London 
15.6 12.7 10.5 
 
 
 
 
Outside of London 
46.6 
27.7 
7.4 
South East of England 18.5 
11.7 
8.0 
Rest of Britain 27.1 
14.9 
7.0 
 
 
 
  
Source: TfL Camera Monitoring, May 2007 
 
Fifty-four per cent of cars using the zone are registered in London – this accounts for 73% of 
captures illustrating the main market impacts of emissions related Congestion Charging would 
be within London. Inner London, in particular, accounts for 39% of cars but the majority, 61%, 
of captures. Sixteen per cent of cars are registered in outer London. However, there may also be 
some wider effect beyond London. Up to 19% of cars using the zone are registered in the wider 
south east of England, mostly in counties such as Hertfordshire, Berkshire, Essex and Surrey 
although these journeys are less frequent.  
45 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
18  Congestion Charging: The low CO2 
discount 
 
 
The low CO2 discount 
 
The low CO2 discount would apply to cars registered post-March 2001 that are equivalent to 
VED bands A and B cars which emit up to 120g/km of CO2. Cars must also be compliant with 
the Euro 4 emissions regulations. TfL would consider that all cars registered on or after 1 
January 2005 would meet the Euro 4 standard, so all new band B cars that came onto the UK 
market in 2006 would be considered Euro 4 compliant. Figure 18.1 shows the distribution of 
cars which would be entitled to this low CO2 discount. 
 
Figure 18.1: Cars entitled for low CO2 discount 
% of 
 
cars 
Congestion Charging Zone 
0.9 
Total London parc 
0.4 
London's 2006 registrations 
4.5 
Source: TfL Camera Monitoring; 
Experian from DVLA 

 
This shows that in June, only 0.9 of cars which travelled in the Congestion Charging Zone 
would be entitled to the low CO2 discount. This implies there is scope for this total and share to 
increase significantly.  
 
Among the total London parc of cars for 2006, some 12,000 fall into this category of being 
entitled to a full discount, which we estimate to be around 0.4% of the total. However, in 2006, 
there were up to 6,400 new registrations of these cars, which constituted 4.5% of all new 
registrations in London. This reflects the fact that almost all VED band B cars registered in 
2006 were compliant with Euro 4.  
 
The difference between the share of cars using the zone (and the share of new registrations in 
band B highlights a risk over time for emissions related Congestion Charging: it is likely to 
substantially increase the number of cars that would be entitled to travel in the zone without 
charge. 
 
The removal of the Alternative Fuel discount 
 
Cars which are powered by an alternative fuel and not solely by petrol or diesel are currently 
entitled to a full discount in using the Congestion Charge Zone. There were over 5,400 cars in 
June that travelled in the Congestion Charging Zone with an alternative fuel discount – around 
0.8% of cars using the zone. However, the frequency of trips into the zone of alternative fuel 
cars is high. These account for over 172,000 captures, over 2% of total captures in the zone, and 
have an average capture per car of 31.6. 
 
However, only a small share of these cars would continue to be eligible for a low CO2 discount 
under the new proposals. The low CO2 discount would replace the discount for alternative fuel 
cars. This is illustrated in figure 18.2 which shows that less than a third of alternative fuel cars 
using the zone during that month would retain the full discount with a change in policy: 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Some 44% of alternative fuel cars do not meet the requirements of band B. Most of these 
cars have CO2 emissions above 120g/km – many fall within VED bands C-F, some within 
band G; while others pre-date 2001. 
•  While 56% of alternative fuel cars fall within band B (or A); the majority of these pre-date 
2006 and so are not compliant with Euro 4. 
•  Therefore, only 30% of alternative fuel cars that currently use the zone would be entitled to 
the low CO2 discount under the new proposals. 
 
Figure 18.2: Cars with Alternative Fuel Discount by age and emissions band 
Cars 
Captures 
Captures 
Proposed 
  
% share 
% share 
per car 
charge 
 
 
 
 
 
Alternative Fuel Cars 
100 100  31.6 
 
 
 
 
 
 
Pre-March 2001 Cars 
5.1 4.6 28.5 £8.00 
 
 
 
 
 
Post-March 2001 Cars 
94.9 95.4  31.8 
 
B(Euro 4) & A 
29.6 
33.1 
35.3 
£0.00 
B (not Euro 4) 
25.8 23.4  28.7  £8.00 
C-F 36 
36 
31.3 
£8.00 
G 3 
2.7 
27.8 
£25.00 
Source: TfL Camera Monitoring, June 2007 
 
The likely impacts of emissions related Congestion Charging 
 
The camera monitoring data shows that the use of cars that meet the criteria for the proposed 
low CO2 discount (band A and B with Euro 4) is currently low. At under 1% of cars using the 
zone, this is higher than the contribution of these cars to London’s overall parc. However, from 
a relatively low base, this does offer the potential for Congestion Charging to provide incentives 
for development of cars in this market.  
 
The market for these cars is at present relatively constrained. Almost all cars fall into the 
SMMT market segment of “basic”. This is perhaps a restrictive segmentation, but it serves to 
show that the immediate future for cars in band A/B4 is likely to be for small city cars – not for 
medium, large or premium cars. However, we can consider the effect of the low CO2 discount 
in terms of its impact on: 
•  Band A cars. There are scarcely any cars that meet the CO2 requirements for band A 
which use the Congestion Charging Zone. At the time of writing, there are no cars in 
band A available for retail directly onto the UK market. This band effectively 
anticipates development based on future technological improvements in cars. 
•  Band B cars that are compliant with Euro 4. There are a growing number of cars in 
London that meet the criteria. TfL would consider that all cars registered on or after 1 
January 2005 would meet the Euro 4 standard, so all new band B cars that came onto 
the UK market in 2006 would be considered Euro 4 compliant. Therefore, although 
these cars constitute just 0.4% of London’s parc, they accounted for 4.5% of registration 
in 2006 and so are likely to continue to increase in coming years. The incentive of a low 
CO2 discount is likely to encourage this further, in particular if we consider: 
o  Band B cars that are not compliant with Euro 4. These already account for 
fewer cars in London than those that meet Euro 4 at 0.4% of London’s parc. 
There is little scope for simply displacing existing band B cars. 
o  Band C cars. Band C cars, like those in band B, are characterised by basic and 
small cars. Band C cars currently represent around 8-9% of London’s parc and 
cars using the Congestion Charging Zone. Given similar costs and 
47 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
characteristics, then there is scope for substantial substitution from band C cars 
to band B which emissions related congestion charging could encourage. 
 
The risk of the low CO2 discount is that it substantially broadens the number of cars that would 
be able to travel in the zone without additional cost. This could feasibly increase the numbers of 
cars using the zone. However, the withdrawal of the alternative fuels discount would partially 
offset this through reducing the number of cars that can travel in the zone without additional 
cost. Up to three quarters of alternative fuel cars would lose their discount because they would 
not meet the new criteria. This removes a bias which gives discounts to larger alternative fuel 
cars which may actually be higher in CO2 emissions and encourages the development of more 
fuel efficient petrol and diesel cars. TfL would keep the impacts of the low CO2 discount under 
review and, if necessary, bring forward changes to the scheme. 
 
48 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
19  Congestion Charging: The higher 
charge for band G 
 
 
The higher charge for band G cars  
 
The higher charge would apply to cars registered post-March 2001 that are equivalent to VED 
band G which emit over 225g/km of CO2. This includes cars registered between March 2001 
and February 2006 which would be recorded as band F but have emissions of over 225g/km. 
Figure 19.1 shows the distribution of cars which would be required to pay the higher charge for 
band G. 
 
Figure 19.1: Band G and equivalent cars eligible for higher charge 
% of 
 
cars 
Congestion Charging Zone 
13.5 
Total London parc 
4.8 
London's 2006 registrations 
10 
Source: TfL Camera Monitoring; 
Experian from DVLA 

 
In June, some 13.5% of cars which travelled in the Congestion Charging Zone would have been 
required to pay the higher charge for band G. Among the total London parc of cars for 2006, 
some 137,000 are band G and equivalent, which we estimate to be around 4.8% of the total. In 
2006, there were up to 15,000 new registrations of these cars, some 10% of all new registrations 
in London. 
 
The difference between the share of cars using the zone (13.5%) and their share in London’s 
total car registrations (4.8%) demonstrates that there is a high propensity for band G cars to be 
driven in the Congestion Charging Zone. This highlights an opportunity for emissions related 
Congestion Charging: it is likely to provide a means of targeting band G cars.  
 
The likely impacts of emissions related Congestion Charging 
 
The camera monitoring data shows that the use of band G and equivalent cars in the Congestion 
Charging Zone is high – and disproportionately larger than their share of London’s parc. There 
is potential scope for emissions related charging to influence the market for these types of cars, 
particularly for those who use the zone frequently. 
 
However, the market for these band G cars consists of several market segments which we would 
expect to develop and respond to Congestion Charing in different ways. The datasets we have 
used provided an indication of the types of market segments that characterise band G. However, 
we cannot identify how frequently cars within these segments travel in the Congestion Charging 
Zone. In broad terms we can suggest that band G consists of: 
•  Executive cars and Upper Medium cars. We estimate that around 20% of band G cars 
are executive cars and a further 10-15% of band G cars are upper medium. Therefore 
these segments represent around a third of all band G cars. Importantly, in terms of new 
registration over 2002-2006, this segment appears to have represented a shift away from 
band G – possibly influenced by reforms in company car taxations or improved fuel 
efficiency of these types of cars – towards bands F and E. This suggests a high degree 
of substitution is possible within these segments between emissions bands. A higher 
charge for Congestion Charging may push up the running costs for those who use 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
executive or upper medium cars and they may be likely to choose to substitute for a 
similar car with lower CO2 emissions. 
•  Sport Utility Vehicles. We estimate that up to 30% of band G cars are SUVs. It appears 
that the number of new registrations in SUVs in London peaked in 2004 and has 
diminished in recent years. There also appears to have been a shift in the market from 
SUVs in band G to band F. Band F accounts for a greater share of new registrations of 
SUVs than band G. Therefore, a higher level of Congestion Charging may push up the 
running costs for those who use SUVs in the zone frequently. In many cases, there are 
substitutes in band F, for example SUVs fuelled by diesel rather than petrol, and 
Congestion Charging may encourage this substitution. In other cases, where SUV’s 
have become prestige high-value cars, then this segment may behave more like sports 
cars or luxury cars. 
•  Sport cars. We estimate that around 20% of band G cars are sports cars. Moreover, the 
majority of sports cars have band G levels of emissions and this has increased in recent 
years relative to the share of sports cars that are in band F. These are cars that are 
usually high value, retaining a high market price and high running costs. Higher 
Congestion Charging may not lead owners to part with these sports cars although it may 
affect their choice of travelling in the zone. 
•  Luxury cars. We estimate that around 10% of band G cars are luxury cars. These are 
cars that are exceptionally high value with a high market price and high running costs 
and so owners/drivers may be less sensitive to a change in Congestion Charging. 
 
50 

Final Report: 
 Emissions related charging – Impact on the vehicle market 
20  Congestion Charging: The higher 
charge for older large cars 
 
 
 
 
The higher charge for pre-2001 cars with 3000cc engines 
 
The higher charge would also apply to cars registered pre-March 2001 that have engine sizes 
above 3000cc. This engine size of 3000cc provides a logical relationship with high levels of 
CO2 emissions. Figure 20.1 shows the distribution of cars which would be required to pay the 
higher charge for older cars with engine size above 3000cc. 
 
Figure 20.1: Pre-March 2001 >3000cc cars eligible for higher charge 
% of 
 
cars 
Congestion Charging Zone 
2.8 
Total London parc 
2.2 
London's 2006 registrations 

Source: TfL Camera Monitoring; 
Experian from DVLA 

 
In June, 2.8% of cars which travelled in the Congestion Charging Zone would have been 
required to pay the higher charge as older cars with large engines. Among the total London parc 
of cars for 2006, some 62,000 cars are pre-2001 and with engines above 3000cc, which we 
estimate to be around 2.2% of the total. The share of these cars using the zone (2.8%) and the 
share of the London parc (2.2%) is broadly comparable. 
 
In 2006, there were clearly no new registrations of cars from before 2001. As there are no new 
cars being registered for this group then we could expect over the next few years to see a decline 
in number and share of older larger cars. Wear and tear means older cars continue to depreciate 
in value while costs of maintenance and repair increase – thereby making these less economic to 
run and bringing many of these cars to the end of their usable life. The DVLA data for 2006 
showed that around 10% of London’s parc was registered over 1993-95 and that this is 
markedly less than the 20% for 1996-98. This implies that 10-12 years is a reasonable life 
expectancy for many cars. Therefore, the years 2007-09 are likely to see a significant reduction 
in the size of the pre-2001 parc as cars from 1996-98 exit from London’s parc. 
 
The likely impacts of emissions related Congestion Charging 
 
The camera monitoring data shows that the use of older larger cars, specifically pre-March 2001 
cars with engine sizes of above 3000cc, is limited. Meanwhile, the passage of time means the 
number of these older cars on London’s roads and therefore the number using the Congestion 
Charging Zone is likely to fall further. Emissions related Congestion Charging should be likely 
to accelerate the exit of these older cars from the market. Closer inspection of the pre-2001 
datasets and the types of cars in London with engines greater than 3000cc indicated that these 
are often large cars of premium brands. 
 
This market for older large cars also consists of several market segments which we would 
expect to develop and respond to Congestion Charging in different ways. It is not possible to 
provide precise details on these segments as there are large numbers of incomplete records for 
these older cars within the DVLA dataset. Neither can we identify how frequently cars within 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
these segments travel in the Congestion Charging Zone. However, in broad terms we can 
suggest that these market segments consist of: 
•  Executive cars. At least half of older cars with engines of 3000cc are types of executive 
cars and these cars almost entirely first registered from 1995 to 2001. It is likely that 
owners of these cars could soon be looking to replace them – their value is likely to 
have depreciated and the costs of maintenance rising. A higher charge for Congestion 
Charging may push up the running costs for those who use the zone frequently and they 
may be likely to choose to substitute for a newer executive car. Newer executive cars 
often have lower CO2 emissions that those produced before 2001. 
•  Sport Utility Vehicles. A large share of old cars with engines of 3000cc are SUVs and 
as with executive cars were mostly first registered from 1995 to 2001. Similarly, owners 
of these cars could soon be looking to replace them – their value is likely to have 
depreciated and the costs of maintenance rising. A higher charge for Congestion 
Charging may push up the running costs for those who use the zone frequently and 
affect the choice of a newer car. 
•  Sports cars and Luxury cars. We estimate that around 5-10% of older cars with 
engines above 3000cc are either high value sport cars or luxury cars. These are cars 
which often retain some of their value over time, possibly as collectable classic cars 
although they also require significant costs of maintenance. It is unlikely that higher 
Congestion Charging would lead owners to part with these cars although they may 
avoid travelling in the zone. 
 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
21  Congestion Charging: A higher charge 
and removing the residents’ discount 
 
 
 
 
The higher charge and the residents’ discount 
 
A significant change under the proposals for emissions related charging is the application of the 
Residents’ Discount. Residents living in the Congestion Charging Zone (or in some streets 
neighbouring the area) are presently entitled to a 90% discount on the current Congestion 
Charge i.e. a weekly charge of £4. Residents with cars that would meet the requirements for the 
standard charge (e.g. those in VED bands C, D, E and F lower than 226g/km) would continue to 
pay the discounted rate of 90% and those with cars in VED bands that meet the low CO2 
discount would receive the full discount. However, it is proposed that the Residents’ Discount 
would be withdrawn for those residents continuing to use band G equivalent cars or older cars 
with engines above 3000cc. These residents would be required to pay the higher charge of £25. 
 
Figure 21.1 shows the distribution of cars currently entitled to a Resident’s Discount on what 
these would be required to pay under the proposals.  
 
Figure 21.1: Cars with Residents’ Discount by age, engine size and emissions band 
Captures 
Proposed 
 
Cars 
% share 
Captures 
% share 
per car 
charge 
 
 
 
 
 
 
 
Residents' discount 
56,000 100.0 1,916,650 100.0 
34.2 
 
 
 
 
 
 
 
 
Pre-March 2001 Cars 
24,520 43.8  734,370 38.3  30.0 
 
 
 
 
 
 
 
 
Less than 2000cc 
17,120 30.6  498,900 26.0  29.1 
£0.80 
2000cc - 2,499cc 
1,830 3.3  85,590  4.5 46.7 £0.80 
2500cc - 2999cc 
2,670 4.8  55,590  2.9 20.8 £0.80 
Over 3000cc 
2,900 5.2  94,300  4.9 32.6 £25.00 
 
 
 
 
 
 
 
Post-March 2001 Cars 
31,480 56.2 1,182,280 61.7 
37.6 
 
 
 
 
 
 
 
 
B(Euro 4) & A 
130 0.2 6,340 0.3 47.3 £0.00 
B (not Euro 4) 
410 0.7 17,310 0.9 42.5 £0.80 

3,800 6.8 127,670 6.7 33.6 £0.80 

3,710 6.6 126,510 6.6 34.1 £0.80 

4,260 7.6 158,300 8.3 37.2 £0.80 

7,810 14.0 287,740 15.0 36.8  £0.80 

11,090 19.8  450,200  23.5 40.6 £25.00 
Unidentified 
270 0.5 8,220 0.4 
 
 
Source: TfL Camera Monitoring, June 2007 
 
There were almost 56,000 cars in June that travelled London’s Congestion Charging Zone using 
the Residents’ Discount. This is over 8% of the 670,000 unique cars which travelled in the zone. 
Residents are more frequent users. They account for over 1.9 million captures, 22% of the 8.5 
million captures in the zone. However, these cars with residents’ discounts are also more likely 
to be cars that are in higher emissions bands: 
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Final Report: 
 Emissions related charging – Impact on the vehicle market 
•  Over 11,000 cars, around 20% of those with residents’ discount, are of post-March 2001 
band G and equivalent cars. This means that around 12% of the band G and equivalent cars 
using the zone are residents. 
•  Some 540,000 captures, over 23% of journeys by those with residents’ discount, are with 
band G and equivalent cars. This is over 30% of all captures of band G cars in the zone.  
 
Therefore, the proposals for emissions related charging may have significant implications for 
some residents. Up to 13,000 residents’ discounts would be replaced with a requirement to pay a 
higher charge. These residents would see the charge change from 80p to £25.00. 
 
The likely impacts of emissions related Congestion Charging 
 
The camera monitoring data therefore tells us that 13,000 unique cars out of 670,000 using the 
zone, that is almost 2%, are residents with cars that would meet the criteria for the higher 
charge. These also account for 540,000 captures out of 8.5 million; that is over 5% of captures. 
Therefore, this indicates that this would be the most concentrated impact of emissions related 
Congestion Charging. 
 
This is also illustrated by the DVLA data which records that a disproportionate share of band G 
and equivalent cars are concentrated in Central London postal areas that reflect the Congestion 
Charging Zone. For example, this indicated that in 2006, 23% of new car registrations in the 
Congestion Charging Zone were band G cars, compared with 10% for London’s new 
registrations overall. It is likely that any reduction in new registrations in band G cars in this 
part of London would substantially affect the total overall. 
 
The effect of the withdrawal of the residents’ discounts would once again depend on the market 
segments in which their cars are defined. A closer inspection of the data within postal areas 
relating to the Congestion Charging Zone indicates that these are areas in which band G cars are 
more likely to be luxury cars, sports cars and SUVs. It is possible that owners of these cars may 
be less willing to substitute them for similar cars in band F or other lower bands. This may 
affect their behaviour, for example in reducing their travel or making journeys outside the times 
the Congestion Charge operates. However, the overall impact depends on the price sensitivity of 
different motorists within this group of residents. 
 
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