BUSINESS cars are getting greener by emitting less CO2 – a fact substantiated by new research – yet remain appealing to drive. But it’s not time to rest on our reduced CO2 laurels, argues Business Car Manager editor Ralph Morton: company car tax changes are just around the corner.ARE we driving greener cars? Well, yes it seems we are, although by greener cars, I mean those with reduced CO2 emissions.

It seems we are driving cars that produce fewer emissions. It’s not hard to understand why. Fewer CO2 emissions means greater fuel economy. And with the price of fuel there’s a great benefit in making the stuff you put in the fuel tank go further.

There is of course the general company car taxation system that is systematically leading all small businesses and company car drivers inexorably down the road towards ‘greener’ cars with fewer CO2 emissions.

And the car makers themselves. Let’s not forget them – they are producing better and better cars that sacrifice nothing in terms of the driving experience, yet produce fewer and fewer CO2 emissions.

Standard-setting BMW 320d EfficientDynamics

The BMW 320D EfficientDynamics is perhaps the company car totem for this: it truly sets the standards. A compact executive car – a premium BMW no less – that, following some form of black magic from BMW’s engineers, produces just 109g/km of CO2. And yet drives like any normal saloon.

There’s no suggestion any business driver need don a hair-shirt to drive the car; a finest Italian wool suit will be fine.

BMW is not alone. Audi’s impeccably groomed and grown-up A1 supermini has a new 1.6 litre diesel engine that produces just 99g/km. That’s quite a package. And, imagine as a small business should you have the cash in the bank, you could buy this – say the L14,480 SE – and have the whole lot written down against your taxable profits in year one. Some temptation.

The fact that we are moving to lower CO2 cars has been substantiated in a new piece of research from the road safety charity the IAM called Energy use and CO2 emissions.

Today’s cars generate 14% of all CO2 emissions in the UK, marginally less than in 2000, despite an increase of 4 million cars on the road.

While carbon emissions from all forms of road transport continue to rise, the rate from cars fell from 196g/km CO2 in 1997 to 174g/km CO2 in 2008. Total UK emissions are forecast to increase but those from cars are set to continue falling.

The report also had some other interesting snippets:

• People’s perception is that cars and aircraft are the two biggest carbon polluters, when in fact the top two are power stations and industry.

• Since 1997 the overall fuel economy of new cars has improved by a quarter, mostly in the last 10 years.

• Average new car fuel consumption for petrol cars fell from 8.28 litres per 100km in 1997 to 6.93 litres per 100km in 2008. Or in terms we can understand, fuel consumption has improved from 34.03mpg to 40.94mpg.

• Households produce as much CO2 as cars.

• The biggest single consumer is the energy generating industry itself when it converts one form or energy into another (for example oil to electricity) and through energy lost in distribution.

IAM director of policy and research Neil Greig had this to say on the report: “Despite what many green experts may say, Britain’s drivers and the motoring industry are doing their bit to reduce carbon emissions. Drivers are shifting to greener engines and have embraced incentives like cheaper vehicle excise duty for more fuel efficient models.”

The future company car tax trap

But we shouldn’t sit around patting ourselves on the back yet. There are some tax rises due in April 2012 – you can check them out in our company car tax tables. And business car managers should think about reviewing company car policies to keep the company’s cars – and the business car drivers – as tax efficient as possible.

Leasing company Lex Autolease is pointing out that the current 120g/km tax break for low emission cars disappears in 2012. The new 10% low rate band for company cars starting at 99 g/km. Above this level, company car tax will increase by 1% for each 5 g/km rise in CO2.

“Many businesses currently have company cars on their fleets with CO2 emissions of 120g/km, or less, which enables them to achieve the lowest tax charges. But now, with the change in legislation, they need to push CO2 even lower,” suggests Paul Lippitt, principal consultant at Lex Autolease.

It’s a point well made. So when you are considering your next business car, whether for yourself to drive or for a staffer, consider the CO2 impact over the longer term: it will reduce your future tax exposure.

Further information

For more comment on car emissions and fuel economy, read the Editor’s Blog The driver makes all the difference to fuel economy.