Road vehicles - all change: the response to the King Review

In June 2008 we reported on Professor Julia King’s review to examine the vehicle and fuel technologies which over the next 25 years could help to 'decarbonise' road transport, particularly cars (the “King Review” - read our previous article). Part I of The King Review, on the potential for carbon dioxide (CO2) reduction, was published in October 2007. Part II, published in March 2008, made recommendations for action. In this article we consider the Government’s formal response to the King Review (the “Response”) published on 28 November 2008. This is essential reading not only for vehicle and component manufacturers but also energy providers and developers of intelligent transport and smart metering systems.

Overall the Government acknowledges that there is a real need to address the climate change impacts of the transport sector and has generally welcomed the King recommendations. Many responses directly reflect agreements that have either recently been reached by the European Commission (the “Commission”) i.e. the 130 g/km CO2 limit for new cars or proposals which are being debated such as biofuels sustainability criteria. The key points of the Response are discussed in more detail further below. A copy of the Response is available here.

Robust CO2 emissions targets welcomed

The Government agrees that the motor industry requires certainty in respect of future emissions targets in order to encourage investment and to bring appropriate technologies to market as quickly as possible. The Response expressly supports the Commission’s recently finalised sales-weighted average new car CO2 emissions target of 130 g/km and its phased introduction by 2015. (Read our law now on the subject). A proposal to set a longer term target to reduce average new car CO2 emissions to 100 g/km by 2020 is supported in addition to a regular review process to consider setting targets every 7-10 years.

Research into full life-cycle costing of vehicles

As recommended by Professor King, the Department for Transport (DfT) is currently taking part in a UN led initiative to examine the feasibility of developing international standards for environmentally friendly vehicles. The study will consider appropriate methodologies for assessing environmental performance, including a lifecycle CO2 assessment approach. Meanwhile, the Department for Environment, Food and Rural Affairs (Defra) has commissioned a research project to pull together existing evidence on the whole life-cycle environmental impacts of cars. The report is due to be published in March 2009.

Fuel Quality - reduction in greenhouse gas emissions

The Response welcomes the recommendation to establish a Low-carbon Transport Fuel Obligation in order to reduce the carbon intensity of the fuel mix covering all fuels provided that it is compatible with EU legislation. Only recently, MEPs and EU governments agreed on the text of a revised EU Fuel Quality Directive which will require fuel suppliers to cut life-cycle greenhouse gas emissions from road fuels by 6% over the decade from 2010 to 2020. The cuts are expected to come from production efficiency improvements and subject to the points below, switches to cleaner fuels such as biofuels. Biofuel sustainability criteria will be added to new law once agreed.

Biofuels remain under review

The Government has agreed with the recommendation to reassess biofuel targets particularly in light of the findings of the Gallagher review on the uncertainty of potential indirect effects of biofuels. The Response states that any future international trade in biofuels must be underpinned by robust and appropriate sustainability criteria. Retrofitting vehicles to run on higher biofuel blends and the possible introduction of 7% to 10% blends by volume for both ethanol and biodiesel have been rejected. The Government plans to ask the Commission to compare the costs of different biofuel-blend options for the EU as a whole.

Transport and emissions trading

Professor King asked the Government to assess the case for inclusion of road transport in trading schemes such as the EU Emissions Trading Scheme whereby fuel suppliers would be the regulated entity and require carbon allowances. The Response states that the UK has asked the Commission to explore this possibility. The Commission has stated that further analysis is required in order to determine whether this is the most appropriate way of dealing with emissions in this sector.

Development of electric and plug-in hybrid vehicles

The Government is developing a work programme to examine potential reductions in CO2 emissions from Electric Vehicles (“EVs”) and Plug-In Hybrid Vehicles (“PHEVs”) in detail. The programme will incorporate existing analysis which includes a recent report on the scope to switch to vehicles powered through electricity from the grid in the period until 2030. The report prepared by Arup and the Centre of Excellence for low-carbon and fuel cell technologies for BERR and the DfT (the “Report”) published in October 2008 identified the following key findings:-

• EVs will play a significant part in the reduction of emissions but will be one of a range of measures including vehicle design, alternative fuels such as biofuels and hydrogen.
• An analysis of the impact of EVs and PHEVs on the UK electricity grid has concluded that there should be sufficient generating capacity to cope with the uptake assuming that demand for charging is managed and targeted at off-peak periods where there is currently surplus capacity. This could be achieved through variable electricity tariffs related to grid demand. The existing national transmission network should also be sufficient to cope with the demand from vehicles.
• There may be distribution issues where local networks are already close to capacity. These could be overcome with local reinforcement. The impact of vehicle charging on local networks and infrastructure is noted as a critical area for study.
• The UK’s automotive sector has a global reputation for R&D, design engineering and manufacturing. The development of EV and PHEV technology provides an opportunity for the UK to take a lead in the development and deployment of the new technologies required.
• There should be a 20 year road map for the ongoing development of technologies enabling the switch. Research should be focused on batteries, internal combustion engines for hybrids, energy scavenging systems and battery recycling, electric motors and control systems.
• Due to vehicle development lead times, the mass production and volume availability of EVs and PHEVs is unlikely to occur before 2014 at the earliest. It is envisaged that up to this date the market will be supply constrained and uptake will be with early adopters.
• The wide spread roll-out and uptake of EVs and PHEVs after 2014 will require increased consumer confidence and education; improvements in battery performance and cost; charging infrastructure which keeps pace with demand; and stimulation of the market through appropriate incentives which encourage the uptake of low carbon vehicles. Without these changes a ‘business as usual scenario’ is expected to prevail.
• The viability of EVs acting as a distributed energy storage system should be explored further.

The Response notes that the Report will be used in future policy making.

Green procurement

The King Review identified a need for public bodies to lead by example and match government department targets of reducing average emissions of new vehicles procured for administrative purposes to 130g/km CO2 by 2010. The Response encourages an active role in the ‘greening’ of fleets and highlights the DfT’s work in developing a programme to support the public procurement of lower carbon vehicles. £20 million of initial funding has been allocated to provide fleet-scale demonstration opportunities for a range of lower-carbon options (with the potential to extend to £50 million if the first phase proves successful). At European level the Government is supporting the adoption of a proposed Directive which will require organisations to consider the environment (air quality and CO2) impacts of vehicles in their procurement processes and decisions (read our previous law now on this subject). Consultation on the implementation of the Directive should take place in 2009.

Cleantech opportunities

The Response highlights the Low-Carbon Vehicles Integrated Delivery Programme developed in partnership with UK-based companies and academic institutions. The Government anticipates that its £100 million investment in the programme will be matched by funding from industry. £10 million of the total is expected to be allocated for the demonstration of ultra-low-carbon vehicles (i.e those with emissions of less than 50g/km CO2). In 2009 DECC will report on the potential for prizes to stimulate technological innovation.

The King Review recommended that DfT should work with the Commission and manufacturers to develop an evidence base on the dashboard technology which could be safely incorporated into vehicles to promote more efficient driving. The Response notes that the Commission intends to bring forward regulation for new vehicles on dashboard instruments such as gear shift indicators (which advise drivers of the optimum points to change gears for good fuel economy) and on tyre pressure monitoring systems.

The Report concludes that the lack of a UK based manufacturer of cells for automotive applications means that the most significant UK business opportunity in the battery field lies in battery pack and battery system development and manufacture. In the absence of a major domestic manufacturer of secondary li-ion cells, the design and integration of cells shipped from abroad into modules and battery packs is perceived as the most promising opportunity for the UK automotive electronics sector.

Fuel economy labelling

The Government has announced plans to work with organisations to review the idea of extending fuel economy labels to the second hand car market. The label could also potentially cover vans. The DfT is currently working on a database of van CO2 data to be available to consumers next year.

Colour-coded tax disks and tighter advertising regulation rejected for now

The introduction of colour-coded tax discs according to cars' emissions performance has been rejected due to concerns about confusion, increasing DVLA costs and 'stigmatising' people using less fuel efficient cars. There are also no plans to strengthen regulation of vehicle advertising before European negotiations on the subject have advanced.

Implications

The Report states that road based transport accounts for approximately 22% of the UK’s CO2 emissions. Given the commitment set out in the Climate Change Act 2008 to achieve at least a 26% reduction by 2020 and 80% reduction against 1990 levels the transport sector will come under increasing scrutiny as a potential contributor to carbon budget reductions as suggested by the First Report of the Committee on Climate Change published in December 2008. The Response is a signpost marking the path of significant change to come. The Report states that business as usual and mid range scenarios for the switch to electrification of vehicles will provide a CO2 saving of less than 1% by 2020 against 1990 UK road transport CO2 levels. It is unlikely that even in combination with reductions in other sectors such limited reductions will be sufficient and therefore additional policies will need to be implemented to raise the bar.

The King Review and the Report have identified a trend for the electrification of vehicles but the Response states that measures to encourage the reduction of greenhouse gases from transport should so far as possible be technology neutral. The pace of the shift to lower carbon vehicles will depend on clear and adequate regulatory, political and financial incentives to be available both to manufacturers and suppliers and increased consumer confidence and education. The Response states that delivery of the accepted King recommendations will be integrated into the DfT’s Climate Change Programme. Increased targeted regulation should be anticipated and, according to the Report, embraced as a catalyst for change and an opportunity to generate a competitive advantage for the UK.