VRT rebates for hybrid cars may be coming to an end. Daniel Attwood looks at the latest controversy to hit the hybrids.
There is growing expectation that the tax incentives introduced to encourage motorists into more environmentally friendly hybrid and bio-ethanol cars could be restricted or withdrawn.
Currently all hybrid cars, which use cleaner electric motors to supplement their engines and bio-ethanol cars, which can run on any combination of the green fuel, E85 and unleaded petrol, are eligible for a 50 per cent Vehicle Registration Tax (VRT) rebate. This relief was extended in the 2006 budget until the end of 2007.
But the launch of several high-powered hybrid vehicles by the luxury Japanese marque, Lexus, has caused a backlash by environmental campaigners who say tax incentives should not be available for these models as they are more polluting than most standard new cars.
"It is madness, it simply does not make sense to provide a tax break for the purchase of large cars," says Ciaran Cuffe, Green Party environment spokesman. "We should be encouraging the purchase of smaller, fuel efficient hybrids, not these gas guzzling monsters."
He points to the 3.5-litre V6 Lexus GS450h, which also has a hybrid motor. This luxury performance car produces 186g of CO2 for every kilometre driven, compared to 173g produced by a typical fleet car such as the Ford Mondeo 1.8-litre diesel.
A small non-hybrid diesel-powered Fiat Panda produces just 114g, while a compact hybrid car such as the latest Honda Civic produces even less, at just 109g.
However, the GS450h has more than €13,500 wiped off its price because of the current hybrid rebate system. Almost 300 performance hybrid Lexus vehicles have been sold so far this year, which has cost the exchequer over €3.4 million in rebates.
Now it is believed that the Minister for Finance, Brian Cowen, is minded to remove or restrict the incentive. "We should have a cut-off level, depending upon the size of the engine," suggests Cuffe. "Or better still based on the car's emissions."
However, Mark Teevan, managing director of Lexus in Ireland, said removing the incentive would be counter productive. "The reduction of CO2 emissions is a priority for this country and hybrid technology has a part to play in achieving this," he claims.
Teevan says the Lexus hybrid SUV, the RX400h, is the only large SUV on the market that produces less than 200g of CO2 per kilometre, and that the GS450h saloon manages 35mpg (8.07l/100km), which is on par with cars two segments below.
"The argument that there should be no derogation of VRT on larger vehicles ignores the reality that individuals have freedom of choice and many have the ability and wish to drive larger vehicles. These people must also receive encouragement to choose the more environmentally friendly vehicles in this sector," he says.
Last year, Mr Cowen extended the 50 per cent VRT rebate to include bio-ethanol cars, which can run on locally produced fuel that produces 70 per cent less CO2 emissions than unleaded petrol.
The pilot rebate scheme for these new flexi-fuel vehicles was initially intended to operate for a two-year period until the end of 2007.
However, even here there is concern about the way this rebate can be exploited as these cars - the Ford Focus Flexifuel and the Saab 9-5 Bio-Fuel - can run on any combination of bio-ethanol and unleaded petrol, or indeed just on unleaded petrol alone. This means car buyers can buy a new Ford or Saab bio-fuel car at a reduced rate and then simply fill up with unleaded petrol.
Despite this, the 100 motorists now driving new bio-ethanol cars since they were launched late last year have bought over 100,000 litres of the fuel, which is sold exclusively in Ireland by Maxol.
"Demand for E85 grew in line with the growth in sales of flexible fuel vehicles and is increasing further as more fuel flexible vehicles enter the market," explains Fergal Harrington, Maxol brand development manager.
"Maxol has recently been allocated further volumes of bio-ethanol under the Government's MOTR Scheme 2, and plans to extend the availability of E85 to around 25 service stations by mid-2007 in response to growing demand."
When announcing the 2006 Finance Bill to the Dáil, the Minister clearly had environmentally friendly vehicles like the Honda Civic hybrid or the Focus Flexifuel in mind for the new VRT rebate. "In recognition of the environmental issues that we face, I am sure the House will welcome the large-scale scheme I have provided for in the Bill to promote biofuels," he told the Dáil. "This is complemented by providing a new VRT relief to promote new flexible fuel vehicles and the extension of the existing relief to dual electric/petrol vehicles."
But now the Minister is being called on to adjust the rebate system to ensure that only low emission hybrid cars and bio-fuel vehicles are eligible.
However, there are doubts about the Government's green credentials. As Cuffe points out, with three cabinet ministers, including the Environment Minister Dick Roche, being driven in high-powered luxury hybrids and a further two performance hybrids on the cabinet fleet, it is clear where the Government's favours lie, he says.
"The Government cloaks itself in green talk," says Cuffe. "But its actions tell a different tale."
VRT: THE ARGUMENTS FOR AND AGAINST - IN THEIR OWN WORDS. . .
'We should be encouraging the purchase of smaller, fuel efficient hybrids, not these gas guzzling monsters' - Ciaran Cuffe, Green Party environment spokesman
'The argument that there should be no derogation of VRT on larger vehicles ignores the reality that individuals have freedom of choice, and many have the ability and wish to drive larger vehicles. These people must also receive encouragement to choose the more environmentally-friendly vehicles in this sector' - Mark Teevan, managing director of Lexus in Ireland