Climate Change
In addition to the EU's voluntary agreements with motor manufacturers and the introduction of colour-coded CO2 labels in showrooms, the UK Government has introduced financial measures to favour cars with lower CO2 emissions.
Since March 2001 the annual Vehicle Excise Duty (VED) rate for new cars has been determined by their theoretical CO2 emission figure and the type of fuel used. This banding is linked to the voluntary colour coded CO2 A - M labelling scheme. VED discounts are available for alternatively fuelled cars, e.g. hybrids, gas and biofuels.
Since 2002 company car drivers have been taxed according to their vehicle's CO2 emissions and fuel type, again with diesel vehicles paying a tax penalty over petrol vehicles with similar CO2 emissions. Tax discounts are available for drivers choosing bio-fuel and hybrid electric vehicles.
On the fuels side, a Renewable Transport Fuels Obligation has been introduced which requires 5% of road fuels to come from a renewable source by 2013. This may be sold as a separate fuel (e.g. 'E85') or blended into normal diesel and petrol at low percentages (5% or less).