BusinessCorporate FinanceFleet special: carbon emissions

Fleet special: carbon emissions

Tread carefully and reducing your fleet's carbon footprint can be a profitable business

There is a global warning on global warming and it is changing the way we
live and work. Politicians are talking more hot air than usual, but this time
with a purpose, and their words are being turned into action, with policies and
campaigns that are designed to drive down emissions in every area of life to
help the planet.

Although transport isn’t the worst offender, it is one of the areas where the
government can achieve the biggest impact in the shortest time – and potentially
swell its coffers too.

So taxes are rising for bigger vehicles, fuel duty is steadily increasing and
there is a clear move towards nationwide road pricing and congestion charging.

Although every motorist will be affected, fleets are in the frontline when it
comes to potential cost and impact on business. For example, employers and
drivers alike have already voiced serious concerns about the financial impact of
fuel price increases and their impact on the wider UK economy.

But fleets don’t have to be victims in the global battle for the environment.
They can actually turn a profit by turning green – if they do their homework.
After all, if a company cuts down on its use of resources, it stands to reason
that it should have lower costs.

Creating a green fleet policy doesn’t have to be difficult, as there are a
number of tried and tested schemes that make a real difference. Vehicles and
fuel can be a valuable starting point. Ensuring cars and vans are as efficient
as possible has a number of benefits.

This doesn’t just mean a firm should put its staff in the smallest cars
available. A 1.0-litre supermini might achieve lower fuel economy than a car
with an engine twice the size, depending on how it is used and driving style.

Drivers can still have a wide choice of vehicles too, despite lowering their
carbon footprint. There are about 300,000 models and variants that emit less
than 120g/km of CO2 on the road, compared to 128,000 in 2003.

And these aren’t tiny tin boxes on wheels, as they represent a wide range of
vehicles, from superminis to serious lower-medium contenders. According to
The Cost, the guide to the running costs of more than 3,000 fleet cars
available in the UK published by industry title Fleet News, companies
have a huge choice of low-emission vehicles available. These include the Toyota
Prius and Honda Civic hybrids, Citroen C1, Fiat Panda, Vauxhall Corsa, Renault
Modus and Toyota Yaris.

There are 887 models and variants producing less than 145g/km of CO2, the
level at which cars qualify for the lowest 15% band of company car tax before
the 3% penalty for diesels is added.

These range from the Ford Focus to the Mercedes-Benz A-class and Renault
Grand Scenic mini-MPV. Low emissions also mean high fuel economy, with some
models achieving more than 60mpg, which can lower fuel costs significantly.

Even SUVs are going green, with the Honda CR-V diesel capable of achieving
more than 40mpg in everyday driving, while at the luxury end of the scale the
Lexus RX400h hybrid SUV combines a V6 engine with electric power to slash its
emissions. Although it is a 3.0-litre petrol automatic, it claims a combined
fuel economy figure of 34.9mpg. At low speeds, it can run on solely on electric
power, turning the SUV into a zero-emission vehicle.

Choosing low emission cars also means low tax bills for drivers and for
companies. The carbon dioxide-based company car tax regime requires drivers to
pay tax on a percentage of the value of their vehicle. This percentage depends
on the emissions of their company vehicle. So the lower the emissions, the lower
the percentage a driver will have to pay tax on.

In addition, companies pay Class 1A national insurance contributions on the
driver’s tax liability, so savings for the driver mean savings for the company.

There are tax breaks for using cleaner fuels, such as biodiesel, and vehicles
that produce less than 120g/km also receive 100% first year capital allowances,
which can reduce a company’s corporation tax bill. And from April 2008, a new
10% company car tax band is being introduced for all cars producing less than

If a firm chooses some of the cleanest vehicles, such as hybrids or those
running on liquefied petroleum gas, it can also take advantage of a 100%
discount on the London congestion charge. For a 100 vehicle fleet that takes
advantage of all the potential savings available, the costs reduction available
to the finance department could run into hundreds of thousands of pounds.

Neil Munro, head of new product development at vehicle management company
LeasePlan, says: ‘Managing fuel is key to reducing a fleet’s environmental
footprint, as less fuel consumed means fewer emissions. It also cuts costs: even
simple measures, such as using the cheapest petrol stations, checking tyres and
engines regularly and educating employees to drive more efficiently, could save
a fleet of 100 2.0-litre diesels about £12,000 a year.’

If companies can persuade their drivers to care about the environment, it can
have a dramatic impact on fuel use, mileage and the costs of running the fleet.

Independent tests conducted by specialist testing company Millbrook at a
GreenFleet Fuel Challenge event revealed the massive impact driving style and
vehicle condition can have on fuel economy, with bad driving costing up to 40
miles per gallon.

Part of the test involved driving a Toyota Avensis 2.2-litre diesel
aggressively around the track with the windows open, air conditioning on and the
tyre pressure slightly lowered.

An identical car was driven carefully round with the air conditioning off,
windows closed and tyres corrected inflated.

Organisers revealed the aggressively-driven car achieved 18.02mpg compared to
56.19mpg for the carefully-driven car. This equates to a fuel saving of more
than £4,000 over 24,000 miles.

Educating drivers is the key. The faster a car is driven, the more carbon
dioxide and nitrous oxide it produces. The most economical speed range is 40mph
to 55mph, according to vehicle management firm Leasedrive. By comparison, a car
driven at 70mph uses 30% more fuel than at 50mph.

The Energy Saving Trust has calculated that if all commuters went a step
further and left the car at home one day a week, this would save enough miles in
a year to drive to the moon and back 35,000 times.

Tips for a greener fleet

1. Promote cars with low emissions to cut employee car tax and
national insurance

2. Evaluate alternative fuel cars to see if they might
benefit your fleet

3. Ensure vehicles are regularly serviced – poorly
maintained vehicles have higher toxic emissions and fuel consumption

4. Identify opportunities to reduce mileage by analysing
business travel

5. Analyse individual fuel consumption to encourage fuel
efficient driving

6. Promote safe, economic and environmentally friendly
driver training

7. Ensure mileage reimbursement rates are environmentally
sensitive and do not encourage excessive journeys

8. Provide access to web sites and route planners to
minimise vehicle mileage

9. Promote satellite navigation and telematics to help
drivers avoid congestion and use the most efficient route to reach their

10. Review arrangements for tele/video conferencing as an
alternative to business travel

Source: Energy Saving Trust

John Maslen is editor of Fleet News

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