A reader proposes a simpler green vehicle nudge for the U.K.

Reader Karl Pike, who works for an MP in Westminster, thinks the current incentive system for green cars should be restructured and reframed. The current system, as in the U.S., offers a series of in-kind tax breaks to individuals and companies that could save billions – if they would take full advantage of them. Pike thinks a cash incentive should be adopted and emphasized because of its simplicity and clarity.

Pike’s views are his alone, and do not represent those of any other party.

I think a cash incentive should be given to encourage people to buy low-emissions vehicles, supplementing the additional incentives of tax breaks and lower fuel costs. Currently, in the UK and other countries, low-emissions technology in vehicles comes with a number of consumer incentives: lower tax bands, exemption from congestion and emissions zones and lower fuel costs, heightened ever more by the spiraling price of oil.

Yet sales of low emissions vehicles, hybrids and electric cars and so forth are still very low and the main market for new cars is still gas-guzzling, expensive, large family cars. Currently the incentives are either not presented sufficiently or lack the correct framing for a human to think: “That’s a great deal and it makes sense for me to own one of those in the long term.”

I propose a cash incentive of £200, as an upfront on-the-forecourt gift, to anyone who buys a low-emissions vehicle. The amount could be higher, and depending on take-up could change, but incentive should be large enough for people to take notice and consider the offer worthwhile. I see the cash incentive framing entirely differently the current incentives for low-emissions vehicles. As Thaler and Sunstein pointed out early on, the presentation of the nudge is extremely important.

I think people would respond better to an up-front, instant reward for choosing to buy a low-emissions vehicle, complimenting the existing incentives. In the current situation I see two problems holding up take-up.

Firstly, there isn’t enough information made publicly available about how good low-emissions vehicles are and how much people save, in addition to a lack of information of availability of charge-up points and gas (as in gaseous fuel) – none of this information is sufficient to overcome the status quo of existing car buying. So any cash incentive would have to be coupled with a new information campaign, explaining people’s choices.

Secondly, of the people I’ve spoken to, many don’t understand the existing incentives or consider them to be immediately relevant to their current circumstances. £200 would frame the incentives differently, an instant reward for making a low-emissions choice. Particularly at the current time, when energy bills are high, I think this could possibly frame environmentally friendly products in a different way: good for climate change and it pays.

The fact that vehicles exist that could slash your fuel bills and cut your carbon emissions, yet still people choose a more expensive car and demand that oil prices come down through fear of bankrupting them doesn’t make any sense. An Econ would clearly pick the more affordable option, yet humans are not and need a nudge. Bringing in a more obvious financial incentive into the choice architecture could do the trick.

As a side note, last year the Camden Council considered offering free parking permits to electric car buyers.

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