“CO2 related taxation of cars and of alternative fuels are an important tool in shaping consumer demand towards fuel-efficient cars. Only a harmonised tax scheme, however, will give the necessary clear market signal which will be decisive in achieving the desired cuts in CO2 emissions,” argued Ivan Hodac, Secretary General of the European Automobile Manufacturers’ Association (ACEA).

“The fragmentation of systems, furthermore, has a distorting effect on the internal market," he went on to observe.

The European car industry urges EU governments to show more resolve in harmonising car taxation schemes, especially after EU Finance Ministers recently rejected the Commission’s proposal for a Directive on car taxation.

“This is a missed opportunity on an essential issue and that, at a time when expectations about massively reducing CO2 emissions are high at the national level”, argued Hodac.

Almost all West-European countries now levy some form of CO2 tax on passenger cars, but tax schemes differ widely across the EU.

Italy, for example, offers a one-off incentive when purchasing a new car. France and the UK use CO2 emissions systematically for taxing privately owned and company cars. Similarly, France, the UK and Luxembourg use CO2 emissions as the only factor for car taxation, whereas others apply a combination of criteria including car price, engine capacity and CO2 emissions.

ACEA went on to suggest that some countries impose rather arbitrary cut-off points to "increase tax rates stepwise".

Further demonstrating the need for a harmonised approach to car taxation, the ACEA pointed out that over the past 15 months, France, Spain, Finland and Ireland have also introduced CO2-related car taxation. This brings the total of EU Member States with such a system up to fourteen.

Moreover, countries such as the Netherlands, Denmark and Portugal have implemented significant changes to their existing schemes.

The auto industry body advocates a linear system, in which tax levels are directly proportionate to the car’s CO2 emissions, and every gramme of CO2 is taxed the same. Car tax schemes should neither include nor exclude specific technologies, and should be budget neutral in end-effect, it argued.