by Franck Latrémolière on 5 December 2017
My piece on predictions about a duty on EFRU (electricity for road use) did not examine the possibility that carbon dioxide emissions might provide a justification for a lower EFRU duty rate.
Combustion of petrol produces 2.31 kg of carbon dioxide per litre. A litre contains about 9.5 units of heat, from which a decent engine should extract 2-3 units of power. A petrol engine therefore emits about 1 kg of carbon dioxide per unit of mechanical work. Petrol duty excluding VAT is 57.95 pence a litre, which corresponds to 19-29 pence per unit of mechanical work.
According to the UK Government, consumption of UK grid electricity currently implies 0.541 kg carbon dioxide emissions per unit. In 2024 it will probably be less. Converting EFRU units to mechanical work involves some losses (charger, battery losses, motor efficiency) but these are modest. Let's imagine fast success for low-carbon electricity generation, and use a range for emissions using EFRU of 0.1 to 0.5 kg of carbon dioxide per unit of mechanical work.
Combining these data, EFRU duty at 10 pence would be technology neutral if the value placed on a kg of carbon dioxide emissions is between 10 pence (equalising 9 pence with 0.9 kg) and 38 pence (equalising 19 pence with 0.5 kg), excluding VAT.
That is between £100 and £380 per tonne of carbon dioxide. UK Government official valuations do not get into three figures except on the highest scenario and after 2030.
In international terms, the equalising valuation would be between 113 euros and 430 euros per tonne of carbon dioxide. The current price of carbon dioxide emissions allowances in the EU is below 10 euros.
The conclusion is that EFRU duty at 10 pence a unit from 2024 will still be a subsidy for EFRU over petrol, even if carbon dioxide emissions are taken into account.