The UK’s move to tax EVs like petrol cars from 2028 is a climate own goal. Here’s why it’s bad policy, and what smarter, data-driven green transport taxes look like.
Most countries say they want cleaner transport. Then they design tax systems that punish people for actually choosing it.
The UK’s plan to put road tax (Vehicle Excise Duty) on electric vehicles from 2025–2028 onward is a textbook example. At the very moment we need to accelerate EV adoption to meet climate goals, policy is shifting from incentivise to penalise. It’s bad climate strategy, bad industrial strategy, and frankly, bad maths.
This matters for anyone working in green technology, clean transport, or sustainable business. Policy is either going to help you hit your climate and growth targets, or quietly sabotage them.
Here’s the thing about EV taxation: governments absolutely should design long‑term, fair ways to fund roads and infrastructure. But doing it in a way that slows down the transition away from fossil fuels is a mistake — especially when smarter, data‑driven options exist.
This article breaks down why taxing EVs like petrol cars by 2028 is the wrong move, what a smarter policy looks like, and how AI and data can help design genuinely green, future‑proof transport systems.
Why Early EV Incentives Work (And Why Removing Them Too Soon Backfires)
If you want a new technology adopted quickly, you make it cheaper and less risky than the old one. That’s not ideology, that’s how markets work.
Electric vehicles are a classic S‑curve technology:
- Early years: high prices, low volumes, strong incentives
- Middle phase: rapid growth, costs fall, incentives gradually taper
- Mature phase: near-100% adoption, incentives replaced with neutral taxes
The UK hit the middle phase just as it started pulling the ladder up.
EV adoption was finally working
- UK battery EV share went from roughly 3% of new car sales in 2019 to around 15–16% by 2023.
- Company car tax incentives and purchase grants helped fleets and higher-mileage drivers move first.
- Running costs were dramatically lower: fewer moving parts, cheaper fueling per mile, far less maintenance.
This is exactly what you want policy to do: shift early adopters and high‑mileage users first, so emissions fall faster and the used EV market grows.
Then the policy narrative flipped
Instead of treating this as a success to double down on, the conversation shifted to “EVs don’t pay their fair share of road tax.”
The problem with that argument right now:
- We still need steep cuts in transport emissions this decade, not in 2040.
- EVs are still more expensive upfront than equivalent petrol models for many buyers.
- Charging infrastructure is still uneven, especially outside major cities.
Taxing EVs as if the job is done sends exactly the wrong signal: the transition is over; back to business as usual. It isn’t, and we’re nowhere near on track for climate targets if adoption slows.
The Real Logic Behind EV Road Tax: Revenue vs Climate
Let’s be blunt: this is mostly about lost fuel duty and Vehicle Excise Duty (VED) revenue, not fairness.
Petrol and diesel cars pay twice:
- Fuel duty per litre of fuel
- VED (road tax) based on emissions/vehicle class
Electric vehicles pay neither (or have historically paid very low VED). As EV share grows, those tax streams shrink. Treasury officials see a hole in the budget and move to fill it. From a pure accounting lens, it makes sense.
From a climate and green tech lens, it’s short‑sighted.
Why this approach is bad climate policy
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Price signals matter at the margin
Many buyers sit on the fence between a new petrol car and an EV. Add several hundred pounds of lifetime tax back onto the EV side and more of them will delay the switch. -
Timing is everything
Once EVs hit, say, 70–80% of new car sales and there’s a healthy used market, taxing them like ICE cars is reasonable. Doing it when internal combustion still dominates slows the transition. -
The externalities are wildly different
A petrol SUV and an electric hatchback don’t have remotely comparable climate impacts. Treating them the same from a tax perspective ignores the whole point of climate‑aligned policy.
The fairness argument is being misused
Some argue: “Why should EV drivers get a free ride when others pay?”
Fair question. But fairness cuts both ways:
- ICE drivers impose health costs via local air pollution that EVs don’t.
- ICE drivers impose climate costs via CO₂ that EVs dramatically reduce, especially on a decarbonising grid.
- Society has benefited from cheap fossil fuels for decades; now we desperately need a managed transition away from them.
If we care about fairness, we should be:
- Gradually raising the true cost of fossil fuels, not rushing to equalise taxes on cleaner alternatives.
- Using carbon pricing and smart incentives, not flat charges that ignore emissions.
What a Smarter EV Tax Policy Looks Like
There is a better way to fund roads and infrastructure without kneecapping decarbonisation. It’s data‑driven, tech‑enabled, and ultimately more transparent.
1. Shift from fuel and ownership tax to usage‑based tax
The fairest long‑term solution is simple:
Tax road use by distance, weight, location and time — regardless of fuel.
That means a form of road pricing or pay‑per‑mile charging, where:
- Heavier vehicles pay more per mile because they cause more road wear.
- Peak‑hour driving in congested zones costs more than off‑peak rural driving.
- Emissions factor in via a separate carbon price on fossil fuels.
Electric vehicles would still pay for their road use, but we’d keep a clear price advantage over fossil fuels to reflect their climate and health benefits.
2. Use AI and data to make pricing intelligent, not blunt
This is where green technology and AI actually earn their keep:
- Dynamic pricing models can adjust per‑mile rates by time of day, congestion level and road type.
- Machine learning can forecast revenue needs, traffic impacts and emissions outcomes under different pricing schemes.
- Telematics and smart meters in vehicles (or via smartphone apps) can track mileage securely, with strong privacy controls.
Done well, this gives governments:
- Stable, predictable revenue
- Lower congestion and smoother traffic
- Strong, targeted climate incentives
And it gives drivers a clear, fair rule: you pay for how much and where you drive, not for owning a cleaner powertrain.
3. Phase‑in matters more than the final state
I’m not arguing EVs should be tax‑free forever. I’m arguing the sequence should look more like this:
-
Launch phase (0–20% EV share)
- Strong purchase incentives, zero road tax, high fossil fuel duty.
-
Growth phase (20–70% EV share)
- Gradual introduction of modest EV road charges.
- Continued fuel duty on ICE, potentially rising carbon price.
- Investment in public charging, smart grids and battery recycling.
-
Mature phase (70%+ EV share)
- Full shift to usage‑based road pricing for all vehicles.
- Fossil fuel phase‑out dates locked in and enforced.
The UK is trying to jump to phase 3 pricing with phase 1–2 adoption. That’s the error.
How This Fits the Bigger Green Technology Picture
Transport isn’t an isolated piece of the climate puzzle. It’s tightly connected to clean energy, smart grids, and AI‑driven infrastructure.
When you tax EVs more heavily without aligning the rest of the system, you:
- Slow demand for home and workplace chargers.
- Reduce the business case for vehicle‑to‑grid (V2G) services that stabilise renewables.
- Undercut fleet electrification projects that depend on predictable running cost advantages.
EVs are a battery on wheels for the clean energy system
As more renewables like wind and solar come online, grids need flexibility. EVs can provide that:
- Charging when electricity is cheap and clean (e.g., windy nights)
- Pausing or reversing charge when the grid is stressed
- Participating in demand response markets via AI‑controlled chargers
If policy keeps EV adoption strong through this decade, we accelerate:
- Smart charging platforms powered by AI
- Grid analytics that predict and manage EV demand
- Fleet optimisation tools that minimise emissions and cost per kilometre
Tax design that slows EV growth delays all of that.
Signal to investors and innovators
Policy is a signal. When a government starts treating EVs like a solved problem, investors read it as: “the high‑growth phase is over.”
For founders and teams building:
- Charging networks
- Battery analytics platforms
- AI‑driven fleet management
- Smart city mobility solutions
…that signal matters. If the UK wants to lead in green technology and clean transport, it can’t send mixed messages on the core enabling technology.
What Businesses and Fleets Should Do Now
If you’re running a fleet, a logistics business, or any organisation with significant vehicle use, the UK tax shift should change how you plan — but not whether you electrify.
Here’s a practical approach.
1. Run the full TCO, not just the sticker price
Even with future road taxes, EVs usually win on total cost of ownership (TCO) over 5–8 years, especially for higher mileage vehicles.
Factor in:
- Fuel vs electricity per mile
- Maintenance and downtime
- Congestion charges and low‑emission zones
- Expected road tax changes over the vehicle lifetime
2. Use data and AI to optimise your transition
Smart fleets are already using:
- Routing optimisation to cut empty miles
- Charging optimisation to use cheapest, greenest electricity
- Predictive maintenance to lower repair costs
Those savings often dwarf changes in road tax policy. EVs don’t just reduce emissions; they make these software‑driven efficiencies far more powerful.
3. Engage with policy, not just endure it
Industry voices matter. If fleets, energy companies and tech providers all quietly accept bad policy, we get more of it.
Engage with:
- Consultations on road pricing and VED reform
- Industry groups pushing for usage‑based, emissions‑aware taxation
- Pilots for smart road charging and data‑driven climate policy
The goal isn’t permanent EV tax holidays. The goal is a coherent system: polluters pay more, cleaner choices keep a real cost advantage, and roads are funded transparently.
Where We Go From Here
Taxing EVs like petrol cars by 2028 might balance a spreadsheet, but it breaks the logic of a serious climate strategy. If you make the clean option less attractive before it’s become the obvious default, you slow adoption, delay emissions cuts, and weaken your own green tech sector.
There’s a better path: usage‑based road pricing, clear carbon pricing on fossil fuels, and AI‑driven transport systems that keep cleaner options consistently cheaper to run. That approach funds infrastructure, supports the grid, and accelerates the transition instead of kneecapping it.
For anyone building or investing in green technology, the message is simple: stay the course on electrification, use data aggressively to win on cost, and push hard for policies that align tax systems with climate reality — not with yesterday’s revenue model.