In the wake of the UK’s exit from the European Union, the government has launched consultations on the shape of proposed legislation for the automotive sector which forms an important component of its Net Zero Strategy. With the deadline looming for the phase out of the sale of new petrol and diesel cars in 2030, the need for clarity is becoming increasingly important to allow manufacturers to plan future strategies and give investors confidence in the direction that the UK automotive sector is heading.
The results of a green paper on a New Road Vehicle CO2 Emissions Regulatory Framework for the UK (“CO2 Emissions Green Paper”) were published on 7 April 2022, in which the Department for Transport (“DfT”) set out new plans to require automotive manufacturers to produce a certain amount of zero-emission vehicles (“ZEVs”) from 2024. Rather than adopting a CO2 emissions based regulatory framework, the so called “ZEV mandate” is designed to ensure that vehicle manufacturers are preparing for the bans commencing in 2030 and to create a sufficiently simple regulatory framework to encourage and regulate EV consumer uptake. The ZEV mandate will run alongside the requirement to reduce average CO2, but will compel car makers to sell EVs and, for lower credits, plug-in hybrids, to help avoid a cliff edge in 2030. Crucially, the annual targets requiring a percentage of manufacturers’ new cars and vans sales to be zero emission from 2024 have been deferred pending the conclusions of a Technical consultation on zero emission vehicle mandate policy design which was also published on 7 April 2022 (“ZEV Mandate Consultation”).
Significant Zero Emission Capability
Between 2030 and 2035, only the sale of new cars and vans with ‘significant zero emission capability’ will be permitted in the UK. The government has made clear that only once the ZEV Mandate Consultation has concluded on 10 June 2022 will it be able to confirm which vehicles will fall within this definition and can therefore be sold between 2030 and 2035 to ensure that the UK still remains within its carbon budget and net zero obligations.
The DfT has confirmed in the CO2 Emissions Green Paper that a tradeable credits-based framework will be adopted, with the onus being on creating a sufficiently simple structure that avoids distortion of year-on-year CO2 emissions through the oversupply and banking of credits. This topic will be further consulted on in the ZEV Mandate Consultation Paper.
Exemptions and derogations
The consultations in both the CO2 Emissions Green Paper and the ZEV Mandate Consultation include sections on possible exemptions and derogations to the future EV regulatory framework. These will be of particular importance to those in the agricultural, emergency services and heavy industries sectors where EV technology is still a way from meeting the demands of the job, as well as smaller volume or SME vehicle manufacturers who may initially struggle to meet the requirements of the ZEV mandate.
The key to a smooth transition is for clarity to be reached on the ZEV mandate as soon as possible to prompt further EV sales and investment in battery technology and charging infrastructure so that the UK is equipped ahead of the 2030 target. As secondary legislation will be laid before Parliament in 2023, with the enactment of statute occurring on 1 January 2024, the government’s legislative road map is cutting it fine for many car and van manufacturers, but the results of the CO2 Emissions Green Paper and items for discussion in the ZEV Mandate Consultation do offer a helpful insight into the direction that the law is headed.
Many companies in the UK’s EV sector, from manufacturers to developers of charging infrastructure, have grown considerably since the government announced its roadmap to ending the sale of petrol and diesel vehicles. Clarity on the key areas of consultation in the ZEV Mandate Consultation will hopefully give them the ability to forecast future demand and ensure that the EV infrastructure is sufficiently developed to support it.
EV roadmap in overview
|July 2017||Government announced Air Quality Plan which called to ban sales of new petrol and diesel cars and vans by 2040.|
|July 2018||Government published the Road to Zero Strategy which outlines how the government will support the transition to zero emission road transport and reduce emissions from conventional vehicles during the transition.|
|June 2019||UK target to bring all greenhouse gas emissions to net zero by 2050 becomes law.|
|November 2020||Government announces its “Ten Point Plan for a Green Industrial Revolution” and launched consultation on the phase out of petrol and diesel cars.|
|March 2021||Outcome and response to proposals to end the sale of new petrol, diesel and hybrid cars and vans announced, which concluded that:the sale of new petrol and diesel cars and vans would be phased out by 2030all new cars and vans must be zero emissions at the tailpipe from 2035any new cars and vans sold that emit from the tailpipe must have significant zero emission capability (which includes some plug-in and hybrids) between 2030 and 2035all new HGVs >26t must be zero emission by 2040|
|July 2021||UK Government publishes CO2 Emissions Green Paper.|
|October 2021||Government announces Net Zero Strategy which sets out policies and proposals for decarbonising all sectors of the UK economy to meet the UK’s net zero target by 2050.|
|November 2021||Government announces new building regulations requiring new homes, buildings and those undergoing major renovations to install EV charge points.|
|April 2022||Outcome of CO2 Emissions Green Paper published.DfT publish ZEV Mandate Consultation.|
|June 2022||ZEV Mandate Consultation to close on 10 June 2022.|
|January 2024||Target date for legislation to be enacted on 1 January 2024.|
For further information, please contact:
George Mason, Bird & Bird