Policy explained: UK Government strategy for ultra low emission vehicles until 2020

The UK Government’s Office for Low Emissions Vehicles (OLEV) is a cross Government, industry-endorsed team combining policy and funding streams to simplify policy development and delivery for ultra low emission vehicles, setup in 2009.

OLEV currently comprises people and funding from the Departments for Transport (DfT), Business, Innovation and Skills (BIS), and Energy and Climate Change (DECC). The core purpose is to support the early market for electric and other ultra low emission vehicles (ULEVs).

In September 2013 the coalition government published an updated, 104-page report outlining their ambitions, funding and policy support for ultra low emission vehicles in the UK: “Driving the Future Today – A strategy for ultra low emission vehicles in the UK”

Here is a summary of the report by EVMarkets.com to explain how much money is being committed, the structure of the funding and the schemes in place to support the EV and ULEV industries…

Summary of funding and investments:

Total claimed investment between 2009 and 2020: £1bn GBP ($1.6bn USD €1.19bn EUR), as follows:

  • £400 million initial funding from 2009 to 2015
  • Creation of a £1 billion Advanced Propulsion Centre, funded by Government (£500m) and industry

Detailed breakdown of funding and support packages:

  • Plug-in Car Grant and the Plug-in Van Grant to help reduce the cost differential between ULEVs and conventional vehicles:
    • Technology neutral and available to both business and private users, purchasing or leasing any eligible vehicle. Levels are set at 25% off the upfront cost of an eligible car (up to a cap of £5,000) and 20% of an eligible van (up to a cap of £8,000) until May 2015
  • Provision of incentives for ULEVs through the tax system:
    • Vehicle Excise Duty exemption for ULEVs, saving owners between £30 and £450 per year at 2013 rates
    • Company car tax (CCT) has been set at 0% until 2015. Thereafter and until 2020, CCT for ULEVs will be at least 3% lower than conventionally fueled vehicles
    • Income tax: All vehicles emitting less than 75g/km of CO2 and company cars emitting less than 95g/km are eligible for a 100% first year capital allowance to March 2015
  • Localised incentives:
    • London Congestion Charge exemption (£10 per day) for vehicles that are either pure electric or that emit 75g/km or less of CO2 and meet the Euro 5 emission standard for air quality
    • Discounted parking. Local authorities are operating a range of schemes to provide discounted or even free parking for ULEVs. Parking for residents, visitors and businesses are included
    • Traffic restriction. A number of cities are reviewing options for future restrictions on traffic in key hot-spots to reduce congestion and improve air quality. An ULEV exemption is being considered as part of several of these.
    • Taxis. York currently operates a discount from their taxi licensing fee for hybrid and electric taxis that emit 100g/km or less of CO2, and also offers a grant to assist with vehicle purchase.
  • Facilitating the provision of recharging infrastructure:
    • Set out the Government’s initial vision for recharging infrastructure in the UK and the steps that it, and other industry players, needed to take to make it a reality.
    • Plugged-In Places (PIP) scheme, which made available up to £30 million in matched funding to eight regional schemes (500 charge points installed).
    • Documenting and measuring PIPs in order that they provide provide a platform for private sector organisations to enter the market and together create a strong and steadily growing infrastructure market. Estimated that non-PIP organisations have delivered more than 5,000 additional charge points
  • Supporting the development of hydrogen fuel cell vehicles alongside the roll-out of plug-in vehicles as part of its “technologically neutral approach”
    • UKH2 Mobility project to develop a business case for the roll-out of hydrogen fuel cell electric vehicles (and the associated hydrogen refueling infrastructure) in the UK from 2015
  • Funding an £82 million programme of research and development to support ULEV research – focused on identifying and supporting emerging technologies that the UK can exploit and lead on, and specifically targeting areas where commercial funding has not been readily available
  • £87 million Green Bus Fund to encourage bus operators and local authorities to switch to low and ultra low emission buses
  • Low Carbon Truck and Infrastructure Trial, which aims to demonstrate low carbon technologies and provide confidence to the freight industry
  • Ensuring that smart metering in Great Britain includes the functionality to support charging of plug-in vehicles
  • Offering a NESTA prize of up to £10 million to develop long-life battery technology for the next generation of electric vehicles

Additional/linked investments:

  • Legislation framework to ensure that every home and smaller business in the UK should have smart energy meters by 2020
  • Low Carbon Network Fund to provide up to £500 million support for research projects sponsored by the distribution network operators (DNOs), to try out new technology, operating and commercial arrangements

Upcoming deadlines and milestones:

  • Late 2013 (TBC): a “period of dialogue with industry and other stakeholders” to help shape the £500 million package of support for ULEVs in the 2015-2020 period
  • Late 2013 (TBC): NESTA long-life battery competition – guidelines and scope to be unveiled
  • 31 October 2013: Second round of bids from train operators, local authorities and the wider public for access to the £37 million package to support the installation of charge-points in homes, residential streets, railway station and public sector car parks and rapid charge-points to facilitate longer journeys.
  • May 2014: hydrogen refueling stations – funding announcement: “Subject to further work in Phase 2 of UKH2 Mobility, we will explore the options for Government grant funding to support industry’s investments in the initial network of around 65 hydrogen refueling stations estimated to be required to support the introduction of hydrogen fuel cell electric vehicles in the UK”
  • May 2014: fact-sheet to be published clarifying tax incentives for ULEVs

Driving factors behinds the policies:

As part of the European Union, the main driving factor and deadlines the UK Government are committed to, which has led to the policies to support ULEVs, is the commitment to lowering all greenhouse gas emissions, and reducing local air pollution.

For 2020, the EU committed to cutting its emissions to 20% below 1990 levels. The EU has offered to increase its emissions reduction to 30% by 2020 if other major emitting countries in the developed and developing worlds commit to undertake their fair share of a global emissions reduction effort.

For 2050, EU leaders endorsed the objective of reducing Europe’s greenhouse gas emissions by 80-95% compared to 1990 levels as part of efforts by developed countries as a group to reduce their emissions by a similar degree.

As a result of the commitments made, the UK Government introduced the Climate Change Act 2008. The carbon budgets agreed, now limit UK greenhouse gas emissions to:

  • 3,018 million tonnes of carbon dioxide equivalent (MtCO2e) over the first carbon budget period (2008 to 2012)
  • 2,782 MtCO2e over the second carbon budget period (2013 to 2017)
  • 2,544 MtCO2e over the third carbon budget period (2018 to 2022)
  • 1,950 MtCO2e over the fourth carbon budget period (2023 to 2027)

Overall the UK is aiming to reduce greenhouse gas emissions by 80% by 2050, the full legislation is outlined here.

Transport is a major source of greenhouse gas emissions and research has estimated that around a quarter of UK carbon (CO2) and other greenhouse gas emissions come from transport. Reducing greenhouse gases from transport will help the UK Government’s long term goal of reducing the UK’s greenhouse gas emissions by at least 80% compared to 1990 levels by 2050.

In addition: Transport is a source of emissions which have an impact on air quality – The UK Government have also committed to reducing air pollution in line with the EU directive: The EU as a whole is going to reduce its emissions of sulphur dioxide, nitrogen dioxide, ammonia, volatile organic compounds and PM2.5 by 59, 42, 6, 28 and 22%, respectively.

Interpretation and sentiment:

The UK Government policies and funding support for ULEVs are focused on driving The UK’s economic growth and ensuring the UK is able to maintain or improve it’s position in the global economic and political landscape – every incentive and investment on offer is designed with economic growth in mind, whilst also meeting European commitments to reducing carbon emissions.

The UK has one of the more generous ULEV incentives for consumers through it’s Plug-in Car Grant and the Plug-in Van Grant, and this has directly impacted sales of ULEVs in the UK and made the UK one of the strongest EV markets in Europe at the present time – But with both the best selling EV: the Nissan Leaf, and the new Toyota Auris Hybrid manufactured in the UK, it makes sense for the UK to offer subsidies which will increase domestic sale.

It’s worth noting here that although the UK is the 4th largest car manufacturer in Europe and second largest car market in Europe, accounting for nearly 18% of Europe’s car sales, the companies that operate the car plants and own the brands, are mainly foreign owned: even the large brands that started in the UK such as Jaguar Landrover, Mini and Rover are now under foreign ownership (Indian, German and Chinese respectively). The UK is a major exporter of Japanese cars for the European markets too; with Nissan, Honda and Toyota all manufacturing cars in the UK for EU markets.

In this position the UK Government has an interest in supporting the broader car market in Europe and the world without the same voter-led pressure to promote certain home grown companies ahead of others – a problem felt in Germany, where certain EU clean air directives have been blocked or delayed in the interests of the larger German-based car manufacturers.

The UK has an interest in promoting Japanese, Chinese, Indian and German brands that are manufactured domestically, and creating markets for their new models. For example: The UK supported the Japanese backed CHAdeMO charging standard and has tried to prevent EU member states from blocking it in Europe in preference for the European developed Combo system favored by some EU and US car manufacturers.

Ultimately though; there is an ambition for UK companies and major UK employers to benefit from investments made, and to meet climate change targets as much as possible through direct UK investments.

“A growing ULEV market in the UK presents a major opportunity to boost the UK supply chain for these technologies, which will supply the next generation of vehicles and beyond. If every UK-made vehicle had a 50% UK supply content rather than the current estimate of around 36%, this would be worth at least 30,000 more direct manufacturing jobs at first tier suppliers, quite apart from the spin-off to their suppliers”

“The potential of this policy is best demonstrated by inward investment that has already occurred. For example, in 2010 Nissan decided to site European production for its LEAF ULEV in the UK. This £420 million investment supported by a Grant for Business Investment offer of £20.7 million secured in excess of 200 direct jobs but also brought many hundreds more in the supply chain. The decision brought with it a brand new battery plant built next to the car assembly plant in Sunderland. These batteries are unique to ULEVs and will serve Nissan’s entire European market for years to come”

key extracts:

“An ULEV emits extremely low levels of carbon dioxide (CO2 ) compared to conventional vehicles fueled by petrol/diesel. They typically also have much lower or virtually nil emissions of air pollutants and lower noise levels. Since 2009, the Office for Low Emission Vehicles has considered ULEVs as new cars or vans that emit less than 75 grams of CO2 from the tailpipe per kilometre driven, based on the current European type approval test. Other definitions exist that suggest 50g CO2 /km is a more appropriate threshold.”

“Our vision is that by 2050 almost every car and van in the UK will be an ultra low emission vehicle (ULEV), with the UK at the forefront of their design, development and manufacture, making us one of the most attractive locations for ULEV-related inward investment in the world… …from around 2040 every new car and van sold in the UK will need to be an ULEV

“Heavy duty vehicles (HDVs – trucks, buses and coaches), unlike cars and vans, are not yet within the scope of European CO2 emissions legislation. While greenhouse gas emissions from passenger cars have decreased during the period 2009-2010 there was an 11% increase in road transport greenhouse gas emissions from heavy goods vehicles. Some form of mandatory European emissions targets for HDVs are considered inevitable. In the first instance regulation could require manufacturers to monitor, report and publish the CO2 emitted from their vehicles followed by the introduction of mandatory CO2 targets through regulation as a second stage.”

“Although it is unlikely that there will a single dominant technology for powering ULEVs, there is a degree of consensus that electric motors will almost certainly be increasingly used in our cars and vans. One of the advantages of electric motors is that they are exceptionally quiet”

“It remains the case that most car journeys in the UK are short with 99% being under 100 miles and 98% being under 50 miles. With increased use of car hire or sharing, individuals could use different types of vehicles for different types of journeys, rather than buying a single vehicle to cover all their possible journey needs”

“Government will not attempt to identify and support specific technologies at this early stage: the mass market transition to ULEVs will happen through industry developing and bringing products to market and consumers deciding which products they wish to buy”

“The internal combustion engine will continue to play a role in road transport for many years, with improvements in fuel efficiency and increased hybridisation providing incremental improvements in CO2 emissions…   … Sustainable biofuels have a role to play in delivering decarbonisation and could play a key role in sectors such as aviation and freight where there are few alternatives to liquid fuel and electrification is far more challenging …   …There is consensus that electrification will be at the core of the longer term decarbonisation of cars and vans”

“This strategy focuses mainly on cars and vans as they present the biggest opportunity for the early adoption of ULEVs”

“by 2050 almost every car and van in the UK will be an ultra low emission vehicle (ULEV), with the UK at the forefront of their design, development and manufacture, making us one of the most attractive locations for ULEV-related inward investment in the world.”

“a funding commitment of over £500 million of new capital investment between 2015 and 2020 to continue to establish the UK as a premier market for ULEVs”

“We recognise that industry needs a long-term and stable framework in order to invest and grow…   …We are committed to supporting the development of a flourishing market for
ULEVs in the UK”

“This is a once in a lifetime technology change. It offers huge opportunities for the UK automotive sector and supply chain. We already have a growing automotive sector with key skills and world leading foundations in the technologies required for this transition. The challenge is to maintain this momentum, grow a flourishing domestic market for the new vehicles and attract manufacturers and suppliers to site research, development and production facilities in the UK.”

“Focusing on inward investment and the supply chain – The Government will continue to pursue the wider prize of securing the maximum possible benefits to the UK economy from the mass market adoption of ULEVs. This means focusing on enabling the UK supply chain to become pre-eminent in low carbon technologies.”

“It is in this period, when the technology for mass market zero emission motoring is being developed, that there is a huge industrial opportunity for the UK. This is a transition that will happen only once. But it is a chance to strategically re-position the UK automotive sector for the rest of the 21st century, building on existing strengths across its supply chain”

You can download the full report from the UK Government’s Office for Low Emissions Vehicles here: Driving the Future Today – A strategy for ultra low emission vehicles in the UK

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