Fleet News

Real fuel cost vs average new fleet car CO2

Fleets are being urged to take action to cut their carbon emissions now or face the consequences of rising fuel prices in the future.

In a white paper called Cars, Costs and Carbon, The Miles Consultancy (TMC) claim businesses are no longer able to count on continual improvements in vehicle fuel efficiency to keep them ahead of rising fuel costs.

“Although cars’ fuel efficiency, as reflected by the average CO2 rating of fleet registrations, is still improving steadily, the cost of fuelling them is no longer falling,” say TMC.

“Carbon is the key element in this equation. Fuel prices, the tax regime and vehicle mileage all determine how much fleets pay for carbon. In turn, mileage levels influence other variable costs such as depreciation, wear and tear and accident damage.

“Cutting these carbon costs does not require you to make expensive and uncertain investments in ultra-low-carbon cars. You can reduce them very effectively by controlling your fleet’s fuel and mileage bills.”

TMC says the two main options for reducing fleet CO2 are: imposing a cap on the CO2 rating of cars allowed on choice lists and setting drivers a target to reduce their measured CO2 emissions by a certain amount each year.
However, while a CO2 cap is comparatively easy to implement, if it’s used in isolation it can have important drawbacks.

“Firstly, fleets usually only replace a third or so of their vehicles every year, so progress on lowering overall emissions is slow and uneven,” explains TMC.

“For the same reason, a cap sends drivers a signal that CO2 is something they only need to think about when their car is due for replacement.

“Lastly, it doesn’t address the two factors influencing drivers of daily fuel and mileage costs – how well and how far each vehicle is driven.”

Setting each driver a target can focus their attention on efficient and productive driving all the time, not just when it’s time for them to order a new car.

“Targets can also reinforce the message that the company is serious about curbing fleet costs and emissions,” says TMC. “They help to instil a culture of continual improvement into workplace driving.”

Since 2005, the average CO2 rating of new cars registered by fleets and businesses has fallen by 2.7% per year while fuel prices have risen on average by 2.9% a year, allowing for inflation.

“If a business had set itself a target to reduce total CO2 emissions from its fleet by 5% a year, starting in 2004, it would have saved £1,000 per vehicle on fuel alone in real terms by 2010,” argues TMC.

“The total saving when taxes and employer’s NICs were included would be even higher. For example, on a 3yr/60,000-mile leasing contract, a driver who chooses a
BMW 320d ED that emits 109g/km of CO2 instead of a 320d SE emitting 140g/km will save themselves over £2,000 in company car tax. Their employer also saves over £700 in Class 1A National Insurance Contributions.”

TMC has launched a carbon reporting tool, which works alongside its mileage audit product, for fleets that want to cut, and account for, their emissions and fuel costs.
It calculates individual CO2 emissions for each car and driver in the company and sends a quarterly report.

This allows the driver and fleet manager to benchmark their CO2 emissions and reduce them, by travelling fewer miles, driving more efficiently and choosing cleaner cars.

“Businesses are taking a much tougher line on fuel, mileage and emissions,” concludes Paul Jackson, managing director of TMC. “They’re no longer prepared to wait while drivers gradually move into slightly greener cars. They are taking the initiative and setting carbon reduction targets or setting firm limits on annual mileage.”

A copy of the white paper Cars, Costs and Carbon is available by emailing mervyn.harrocks@themilesconsultancy.co.uk.

Step-by-step CO2 reduction

  • Voluntary or compulsory? - If you make participation voluntary, consider offering drivers an incentive to take part.
  • Establish the baseline - You need to know the total amount of CO2 emitted by each vehicle over the previous year. The figure is calculated from the volume of fuel used.
  • Set the target - Most companies set a target of 3% to 5% per year. This is high enough to deliver significant savings relatively quickly.
  • Communicate to drivers - Explain why the business has to cut CO2 emissions – to combat rising costs, maintain profitability, safeguard jobs and protect the environment. Offer tips on how drivers can go about cutting their CO2 emissions.
  • The business mileage question - You need to decide whether to apply the programme to all mileage or only to business mileage.
  • Run the programme - Management reports enable the business to track the progress of the programme and produce their own updates on projected reductions in fuel costs and emissions.
  • Refresh and review - Ensure that the scheme receives plenty of publicity within the company to keep it fresh in people’s minds.

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