UK transport decarbonisation strategy: Impact for road transport

England and Wales

On 14 July 2021, the UK Department for Transport published the following:

  • The wide-reaching policy plan on decarbonising transport and the targets and ambitions required to meet the UK’s net-zero targets (the “Decarbonisation Plan”);

  • A delivery plan designed to bring together all of the committed funding streams and measures for decarbonising cars and vans together with the Office for Zero Emission Vehicles (“2035 Delivery Plan”);

  • The outcome of the 2019 EV smart charging consultation (“Smart Charging Outcome”);

  • a Green Paper on the proposed regulatory framework for the UK with regard to emissions standards for all newly sold road vehicles (“Emission Standards Green Paper”);

  • a consultation on when to phase out the sale of new, non-zero emission heavy goods vehicles (“HGV Consultation”); and

  • The Government response to its March 2021 consultation on changes to the RTFO to accelerate transport decarbonisation.

In this Law-Now, we examine what these publications entail for road transport, particularly the Zero Electric Vehicle (“ZEV”) sector. We will publish further Law-Nows on what the Decarbonisation Plan means for decarbonising the aviation, maritime and rail sectors.

The Decarbonisation Plan

The Decarbonisation Plan covers private and public transport, freight, rail, shipping and aviation, prioritising the shift to a decarbonised and green transport sector.

The Decarbonisation Plan contains a number of targets and commitments from the UK Government in achieving these priorities. With scant detail about implementation, it mainly provides an overview of the ‘state-of-play’ for the decarbonisation strategy.

We have noted the key takeaways and main commitments contained in the Decarbonisation Plan below:

Area

Key commitment / delivery

Incentivising uptake of zero emission cars and vans

  • The publication of the 2035 Delivery Plan. See further details below;
  • A consultation on implementing the ending the sale of new petrol and diesel cars by 2030, including consulting on the final phase out date of non-zero emission cars and vans by 2035 (or earlier if a faster transition appears feasible);
  • Continuing the support for zero emission vehicles through financial and non-financial incentives, including £582 million for plug-in grants and reducing ZEV purchase prices for consumers;
  • The delivery of an action plan to build new UK opportunities for zero emission light powered vehicles; and
  • A consultation on a car manufacturer zero-emission vehicles mandate.

End of ICE HGV sales

  • Announcement of the consultation on ending the new sale of diesel heavy goods vehicles (“HGVs”) by 2035 or 2040 (depending on size). See further details below.

Decarbonising Public Transport

  • A consultation on modernising the Bus Service Operators’ Grant to include a green incentive of 22p per km for zero emission buses in 2021;
  • A consultation on a phase-out date for the sale of new non-zero emission buses and coaches (an initial consultation on ending the sale of new diesel buses closed in April 2021 with a further consultation to be published later this year); and
  • A commitment to supporting the delivery of 4,000 new zero emission buses.

Encouraging hydrogen fuelled transport

  • The plan will increase the Renewable Transport Fuel Obligation by 5 percent, which is estimated to achieve additional carbon savings of up to 20.8 MtCO2e between 2021 and 2032;
  • Publishing an overarching Hydrogen Strategy summer 2021 and focusing on the increased production of hydrogen; and
  • Investing £3 million in 2021 to establish the UK’s first multi-modal hydrogen transport hub in Tees Valley.

2035 Delivery Plan

The 2035 Delivery Plan is iterative and the Government plans to publish regular updates, with a formal progress review by 2025. By its nature, there are not any new announcements in the 2035 Delivery Plan and it is broadly a summary of pre-existing measures. However, it highlights the key methods through which the Government will deliver zero emissions cars and vans by 2035, which includes:

  • Increasing the uptake of zero emission vehicles by:

    • introducing a new road vehicle CO2 emissions regulatory regime by 2024 (as outlined further below);

    • investing £582 million for the plug-in vehicle grants scheme until at least 2022/23; and

    • zero emission cars receiving favourable company car tax rates until at least March 2025.

  • Accelerating the rollout of charging infrastructure, including:

    • supporting the private sector to deliver at least 6 high powered chargepoints at every motorway service area in England by 2023; and

    • Ofgem enabling investment by DNOs to upgrade electricity connections at motorway service areas across England’s motorway service areas;

  • Publishing an Electric Vehicle Infrastructure Strategy in 2021;

  • Continuing the funding of grants for home, workplace and on-street chargepoints until at least 2024/25, including the launch of the Local Infrastructure Fund by Summer 2022;

  • Regulating for chargepoint infrastructure provision in new homes in 2021;

  • Introducing regulations in 2021 to ensure all private chargepoints have smart capability;

  • Publishing a consultation in 2021 to ensure battery recycling legislation is fit for purpose;

  • Publishing a Hydrogen Strategy to set out how the UK’s hydrogen economy will develop;

  • Publishing a second phase of the Smart Systems and Flexibility Plan (SSFP) in 2021 to set out the reforms needed to secure flexibility across the energy system, including electric vehicles;

  • Providing late-stage R&D support for ZEV technologies through the £1 billion Advanced Propulsion Centre Competitions (building on 8 years of investment), with funding confirmed to at least 2023; and

  • Introducing more Clean Air Zones by local authorities between 2021 and 2023.

Smart Charging Outcome

The Smart Charing Outcome confirms that secondary legislation will be introduced this autumn pursuant to the powers under the Automated and Electric Vehicle Act 2018 to ensure all new private electric vehicle (EV) charging points can meet required smart charging standards. The smart mandate will apply to all domestic and workplace chargepoints and will require that each chargepoint can:

  • send and receive information; and

  • respond to this information by increasing or decreasing the rate of electricity flowing through the chargepoint and changing the time at which electricity flows through the chargepoint.

However, it will not cover 50kW-plus rapid chargers and will only apply to the sale of the chargepoints and not the installation.

We will be publishing a more detailed Law-Now on the Government response to the smart charging consultation which will be available shortly.

Green Paper on a new road vehicle CO2 emissions regulatory framework

The Green Paper sets out two regulatory proposals for new cars and vans:

1. ‘Tightening’ of existing efficiency-based regulations

This proposal would replicate the current UK regime but with CO2 targets ‘turned up’ to the extent that the targets would need to be set at 0g CO2/km by 2035, ensuring that all new cars and vans are zero emission at the tailpipe by 2035.

This approach would replicate the current regime as closely as possible with tougher targets providing a degree of continuity. As the bulk of the framework already exists in UK law, it would allow the Government to set out a pathway to 2030/35 at the earliest possible opportunity.

Disadvantages include that without mandating the actual number of vehicles required, it may provide lower assurance to support private sector investment in the wider zero emission vehicle eco-system, including by chargepoint providers and new entrant zero emission vehicle manufacturers. Further, by rewarding incremental improvements in petrol and diesel engine vehicles, there is a risk that this approach comes at the expense of faster development and deployment of zero emissions vehicles.

2. Introduce a zero-emissions vehicle mandate

This proposal would introduce a zero-emissions vehicle (“ZEV”) mandate/sales target for the percentage of ZEVs sold each year. Manufacturers could earn ‘credits’ for selling and registering qualifying vehicles, alongside the CO2 regulations based on the current framework.

Under this option manufactures could also ‘buy’ their way to the target which would provide financial incentives to overachieve.

This would require the establishment of a new regime and a secondary trading market for both ZEV Credits and CO2 credits.

Manufacturers may face increased administrative burdens by requirements to essentially meet two separate targets under the regime, and the additional credit process.

This second option of a ZEV mandate is currently the Government’s preferred option as a way to fully legislate for the phase-out of new petrol and diesel cars and vans in 2030, and to legislate for all new cars and vans being zero emission at the tailpipe by 2035.

The consultation also seeks views on the wider regulatory framework including:

  • the vehicle models that should be in scope;

    • cars and vans are within scope with fleet-wide targets applying in future years;

    • some smaller HGVs are currently within scope and will be influenced by the consultation on phasing out the sale of all new non-zero emission HGVs;

    • new buses and coaches are within scope, but targets have not yet been defined;

    • whether derogations and exemptions should apply for certain specialist vehicles and/or niche and small volume manufacturers;

  • the level of fines that should be issued for non-compliance; and

  • defining the ‘significant zero emission capability’ that all new hybrid cars and vans will be required to deliver from 2030 to 2035.

Vehicle manufacturers will need to prepare for the updated regulatory regime. Currently, this appears to be the ZEV mandate option. The consultation on the proposals is open until 22 September 2021.

HGV Consultation

The HGV Consultation notes that road transport makes up 90% of transport-related carbon emissions in the UK with trucks and lorries accounting for 2% of vehicles on the road but 22% of road transport emissions. The number of HGVs on the roads is predicted to grow which will risk increasing emissions from the sector.

Existing measures to decarbonise HGVs include regulations that came into force in January 2021 requiring HGVs to reduce CO2 emissions by 15% by 2025 and 30% by 2030 compared to the 2021 baseline (Regulation (EU) 2019/1242 which has been transposed into UK law after Brexit).

The key proposal in for the HGV Consultation is for:

  • the sale of new non-zero emission HGVs (weighing 3.5 tonnes up to 26 tonnes) to be banned from 2035; and

  • the larger trucks weighing more than 26 tonnes from 2040.

The consultation seeks views on whether the stakeholders agree with the approach to phase out dates for new non-zero emission HGVs into two weight categories and whether the categories are correct.

The consultation emphasises that the technology required for lighter zero emission HGVs is largely mature and that as the supply chain scales up, the technology could be a direct swap for diesel vehicles in the lighter weight categories. However, batteries are unable to carry the heaviest loads over longer distances with battery weights reducing space in the lorries. A similar concern is noted with compressed hydrogen tanks. It is anticipated that the energy density by volume and weight of batteries will improve but not necessarily enough to satisfy the requirements of long-haul operators.

The consultation is open until 3 September 2021 for comment from relevant stakeholders.

RTFO

The Government response confirmed the Government’s plans to increase the Renewable Transport Fuel Obligation by 5 percent. The response to the consultation also confirmed the expansion of hydrogen to new modes of transport including for RFNBOs to be used in the maritime sector, renewable fuels to be used in trains with alternative propulsion systems and alternatively powered non-road vehicles.

The Government intends to make legislative changes so that the new policies, including the increased targets, apply from the start of the next RTFO obligation period i.e. 1 January 2022.

Comment

There have been several frustrating delays in relation to the regulatory landscape for the burgeoning ZEV sector, for example, the Decarbonisation Plan was originally expected in 2020. Further, the Government’s Hydrogen Strategy has also now been delayed with no indication of when it will be published, however, this will certainly not be until after the summer recess. Several responses and policy issues have also been deferred, for example in relation to charging point interoperability. What is clear is that the RTFO (Ripe for reform: proposed RTFO developments to facilitate hydrogen uptake (cms-lawnow.com)) is anticipated to be reformed to incentivise the use of hydrogen (and, hopefully, clarify how precisely suppliers and customers can make use of this regime).

It is well recognised that there are a wide range of policy, regulatory and infrastructure challenges for the UK to overcome to meet its targets to fully phase-out new diesel and petrol vehicles by 2030 and meet its wider net-zero commitments. The announcements covered in this Law-Now are very welcome, but must signal the start of a period of focus and momentum on these issues from Government to ensure such ambition can be turned into reality.