THE UK has become the first country in Europe to put the precise environmental performance of cars at the heart of its motoring tax system.

European governments have used engine size, vehicle weight and fiscal horsepower as approximate environmental measures for taxing cars, but the UK's new vehicle excise duty (VED -annual road tax) and company car tax will be based on a car's individual emissions of carbon dioxide - the worst greenhouse gas.

The new taxes endorse the European Commission's new European Climate Change Programme. They follow the warning from EC environment commissioner Margot Wallstrom that member states have to make more effort for the EU to meet its Kyoto target of cutting greenhouse gas emissions.

The new UK motoring taxes could become a blueprint for other member states, as governments compare best practice in tax and economic performance, according to Malcolm Harbour, MEP.

And Clive Tulloch, a partner with PricewaterhouseCoopers, said that the revolution in IT was making accurate and specific vehicle information more readily available to drivers, employers and tax authorities.

The UK's new VED system comes into force on March 1, 2001, and will separate new cars into one of four bands, depending on their CO2 emissions.

Company car tax will change in April 2002, when drivers will be taxed on a percentage of the list price of their car, determined by its CO2 emissions.

The starting point will be 15% of list price, rising by 1% of list price for every 5g/km of CO2, up to a maximum of 35%. Diesel cars will incur a 3% penalty because of their emission of other pollutants, but should still prove tax advantageous because of their low CO2 emissions.

The new system will also end the current business mileage discounts that see drivers incentivised to cut their company car tax bills by exceeding 2,500 and 18,000 business miles a year. (April 2000)