If you exempt too many vehicles, congestion will increase. And why should any be exempt?

It is a mistake that policy makers keep repeating: By imposing a standard that stipulates a design, rather than one that defines the performance or outcome desired, innovation is stifled and the often-beneficial effects of competition are eliminated.

The latest example of this folly comes from the often-gridlocked streets of London where a Congestion Charge actually discourages vehicles that are cleaner and more efficient than the ones the regulation exempts. The driver of a hybrid vehicle can travel within the so-called Congestion Charge zone free-of-charge while the driver of a similar, or even lower, carbon dioxide emitting conventional internal combustion-powered car is charged £8.

This “tax” could add a financial burden of over £2,000 per year to those drivers who select a traditionally powered low emission car. Not good if you are the driver. Not bad if you are collecting the revenue.

Tax collector or environmentalist?

Small wonder then that Volvo, not without self-interest of course, is calling on The Mayor of London, Boris Johnson, to publish the findings of the review of the Congestion Charge exemptions that he promised to deliver before the end of 2009.

Johnson was a bit busy last week hob-knobbing with many other government grandees in Copenhagen at taxpayer expense discussing the various, expensive, approaches that need to be  imposed on you and me to ameliorate the possibly pernicious effects of man-made carbon dioxide emissions on the global climate.

I do not believe this regulatory problem of unintended consequences and perverse effects came up while Johnson was boasting about the wonderful benefits of the Congestion Zone, but it should have because it raises many, well, inconvenient truths about economic and free market behaviors that need to be at the heart of any global warming regulatory debate.

Greenish by CO2 results, not hybrid design.

Volvo Car UK believes that the principle of hybrid cars being exempt from the Congestion Charge is outdated and unfair. Moreover, from its point of view they have a large, or rather small point.

The Volvo S40 1.6D DRIVe with Start/Stop emits as little as 104 g/km of CO2 and returns up to 72.4 miles per gallon under driving conditions that appear remarkably similar to the ones London is allegedly combating.

Hybrid-powered cars have CO2 outputs ranging from 89 g/km to 219 g/km, yet all are exempt from the London Congestion Charge.

Back in June, Volvo wrote to The Mayor requesting he undertake a review of the Congestion Charge exemptions. In an ensuing media tiff, which generated plenty of product publicity by and for Volvo, the politician eventually promised last August to review existing exemptions and publish a report by the end of the year — a promise that has yet to be kept as the days of 2009 wane.

There are of course an increasing number of low CO2 vehicles, including diesel hybrids, plug-in hybrids and electric vehicles, and even lightweight direct-injected gasoline powered cars, and there is the rub that extends well beyond the London congestion zone.

Governments keep imposing design standards not performance ones. Look at the current madness over giving lavish tax credits to electric vehicles that will little effect on actual CO2 emissions for decades, if they ever do. Regulation should be technology neutral in order for innovation to work.

So what outcome are we trying to obtain here as we go forward? Are we revenue raising or cleaning the air?

It never started for American diplomats.

The U.S. Environmental Protection Agency has ruled that carbon dioxide is harmful to human health. So taken to its logical extreme, we should not be exempting one class of vehicle while discriminating against another that is just as effective at reducing it. And, before someone e-mails me, why should any CO2 emitting vehicle be exempt at all, especially Al Gore’s private jet, which is the grossest of CO2 emitters directly into the upper atmosphere?

And for a delicious bit of hypocritical irony consider that the U.S. Embassy in London refuses to pay the now millions of pounds it owes in congestion charges, claiming it is a tax that diplomats, but not you or me, are exempt from.

All this while the Obama Administration is telling us what a problem global warming is.

I guess our London diplomats work for some other president.