Today, the UK government has announced proposals for the country’s Zero Emission Vehicle (ZEV) mandate. Importantly, the mandate includes the UK Government’s commitment to end the sale of new petrol and diesel cars and vans by 2030 and for all new cars and vans to be fully zero emissions by 2035.
The mandate also outlines that zero emission electric vehicle (EV) sales have grown rapidly in the UK in the past decade. In the last 12 months they have reached 15% of new car sales up through June 2022. The mandate outlines proposed targets for the UK automotive industry over the coming decade as we move towards a total ban on sales of internal combustion engine vehicles by 2035.
Requiring a minimum percentage of manufacturer’s new car and van sales to zero emission each year from 2024 will ensure their future supply and provide certainty to chargepoint operators and energy suppliers to coordinate the necessary investments in new technology and infrastructure.
The proposed minimum ZEV target trajectory for new cars sold begins at 22% in 2024. This will increase to 80% in 2030 reaching 100% in 2035. The proposed minimum ZEV target trajectory for new vans sold begins at 10% in 2024 and reaches 70% in 2030 on the way to 100% in 2035.
This main points of the mandate are outlined below:
Executive Summary of ZEV Mandate
1. The transport sector produces the greatest share of UK domestic greenhouse gases (GHGs) and has seen relatively little change since 1990 while emissions from other sectors (such as energy and business) have steadily fallen. Cars and vans alone were responsible for 18% of the UK’s total domestic GHG emissions in 2021, meaning that removing the exhaust emissions from new cars and vans sold in the UK is fundamental to decarbonising transport and the UK economy.
Although new cars and vans have become more fuel efficient over recent years, it is now clear that zero emission vehicles (ZEVs) are the only way to decarbonise road transport in line with the UK’s net zero legislation, and to end our contribution to climate change by 2050. While this policy is primarily aimed at reducing GHG emissions, it is also expected to deliver significant air quality benefits, for example by leading to reductions in nitrogen oxides (NOx) emissions.
2. The UK is not undertaking this transition alone. A global race to ZEVs is underway that will deliver real benefits for drivers in terms of running costs and see new investments in battery production, electric motors, power electronics and supply chains.
This has the potential to create thousands of highly skilled clean jobs, support new export opportunities for UK business at the forefront of this change, reduce our reliance on fossil fuels and secure our future energy security. ZEVs can improve public health and have the potential to transform our urban realm.
3. The transition cannot happen through market forces alone. The UK Government has committed to end the sale of new petrol and diesel cars and vans by 2030 and for all new cars and vans to be fully zero emission at the exhaust by 2035. Zero emission vehicle sales have grown rapidly in the UK in the past decade, reaching 15% of new car sales in the 12 months up through June 2022.
Requiring a minimum percentage of manufacturer’s new car and van sales to zero emission each year from 2024 will ensure their future supply and provide certainty to chargepoint operators, and energy suppliers to coordinate the necessary investments in new technology and infrastructure.
4. Following a Green Paper on New Road Vehicle CO2 Emissions Regulatory Framework for the United Kingdom (2021), a technical consultation on ZEV mandate policy design (2022), and extensive stakeholder engagement, the UK Government proposes to establish a new regulatory framework for the UK.
This will be a ZEV mandate requiring an increasing share of zero emission cars and vans, alongside a CO2 emissions regulation to ensure that new non-zero emission cars and vans do not become more polluting in future years. ZEV mandates have successfully spurred greater ZEV availability and choice for consumers and higher uptake in the United States, Canada and China.
5. This initial tranche of legislation is intended to take effect from 2024 and cover the period through to 2030. This consultation lays out the proposed regulation for both ZEV and non-ZEV elements. Given ongoing uncertainties around the real-world emissions and test cycle monitoring of various non-ZEV drivetrain technologies, which we continue to track, the UK Government cannot yet provide a detailed definition of significant zero emission capability (SZEC) for cars and for vans.
Therefore, this legislation does not define SZEC requirements. We intend to set out an approach in mid-2023 and implement it in future legislation, though the UK Government’s commitment to ending the sale of all new petrol and diesel cars and vans by 2030 and all new non-zero emission cars and vans by 2035 is unchanged.
6. The proposed new regulatory framework for car and van CO2 emissions is a devolved policy area in accordance with the Climate Change Act 2008. The Devolved Administrations and the UK Government each has the right to enact this proposed policy or a separate and distinct scheme.
As such, the Devolved Administrations and the UK Government are undertaking this consultation jointly to gather views on the proposed approach to a UK-wide framework as well as alternative approaches.
ZEV Mandate Overview
7. The primary lever to deliver legally required reductions in carbon emissions from light-duty road transport is the ZEV mandate. Trading schemes for both new cars and vans will be enacted using powers in the Climate Change Act (2008). Each year, manufacturers will receive allowances to sell non-ZEV vehicles up to a given percentage of their fleet of new cars and vans, with the intention that ZEVs account for the remainder of sales (the ZEV target).
Any excess non-ZEV sales must be covered by purchasing allowances from other manufacturers, by using allowances from past or future trading periods (banking or borrowing) during the initial years of the policy or by offsetting with credits.
8. The ZEV mandate will apply to all manufacturers responsible for the type-approval of cars or vans registered in the UK, irrespective of the type approval route. Manufacturers that are part of a group of connected undertakings may choose to form a closed pool and participate as a group.
Recognising their smaller contribution to emissions and more limited resources, small volume manufacturers (selling fewer than 2,500 cars or vans annually in the UK) will be exempted from targets until the end of 2029. Special purpose vehicles (SPVs) are also considered out of scope from the ZEV mandate, given challenges in producing zero emission SPVs, but zero emission SPVs would earn ZEV credits to recognise the emissions reductions that such vehicles would create.
9. To qualify as a ZEV, it is proposed that a vehicle must emit no CO2 or any other targeted greenhouse gases at the exhaust, have a minimum range of 120 miles according to the WLTP test standard, and meet certain minimum warranty requirements to ensure a consistent and predictable consumer experience. These requirements are met by the vast majority of ZEVs sold in the UK market in 2022.
10. The proposed minimum ZEV target trajectory for new cars sold begins at 22% in 2024, increasing to 80% in 2030 reaching 100% in 2035. The proposed minimum ZEV target trajectory for new vans sold begins at 10% in 2024 and reaches 70% in 2030 on the way to 100% in 2035.
The legislation being proposed will cover ZEV and non-ZEV requirements in the 2024-2030 period; legislation covering the 2031-2035 period will be introduced at a later point, but it is intended that the legislative minimum trajectories will be at least as ambitious as set out in current trajectories.
11. If manufacturers exceed their ZEV targets, excess ZEV mandate (ZEVM) allowances may be traded freely to other manufacturers for any price.
12. The transition to ZEVs has increased rapidly in recent years. However, the UK Government recognises that some vehicle manufacturers face challenges meeting targets in the initial years as they shift their business towards ZEVs.
Therefore, this proposal includes some additional flexibilities during the initial phase of the regulation, from 2024-2026. During that phase, manufacturers may borrow a limited number of ZEV allowances from future periods if they are unable to achieve compliance from their own sales.
13. However, the number that may be borrowed is capped and will decline each year: 75% of the target may be covered by borrowing in 2024, 50% in 2025 and 25% in 2026. Furthermore, any borrowing must be repaid with 3.5% annual interest to maintain carbon savings. Beginning in 2027, borrowing from future trading periods would not be allowed, and participants’ deficits must be repaid by the end of 2027.
14. To promote good supply of ZEVs to consumers and allow for differences in manufacturer transition plans, unused allowances may be banked for use in future years. This flexibility will extend at least until the end of 2030, but banked allowances will expire if not used after 3 years to ensure that sufficient ZEV allowances are available for effective trading.
15. This is an opportunity to earn additional ZEV credits for ZEVs deployed into car clubs, which can decongest our roads and offer a zero emission transport solution to a wider set of users. Specifically, we suggest that each ZEV registered in an approved car club would earn an additional 0.5 credits. Qualifying cars or vans must remain in use in a car club for 2 years, and manufacturers may not earn extra credits for more than 5% of their total car or van sales.
16. To ensure the benefits of ZEVs are available for those with reduced mobility and to promote the deployment of ZEVs in this sector, the proposal also offers extra credits for ZEVs that are converted into wheelchair accessible vehicles (WAVs). Specifically, non-ZEV WAVs would not be counted in a manufacturer’s activity, and we suggest that manufacturers may earn 1.5 credits for each ZEV converted to a wheelchair accessible vehicle.
17. If manufacturers cannot meet compliance through in-year allocated allowances, banked or borrowed allowances, allowances purchased from other manufacturers through trading, or bonus credits, they must make a payment to government. The proposal suggests payments of £15,000 per non-ZEV car and £18,000 per non-ZEV van registered which is not covered by allowances.
Non-ZEV CO2 Emissions Standard – Overview
18. The goal of this new regulatory framework is to support the rapid shift toward ZEVs and provide market certainty for the automotive, chargepoint and energy sectors and their supply chains.
Additional research and development into further incremental improvements to combustion engine efficiency technologies is no longer a key objective. The framework includes a CO2 emissions standard applying to new non- ZEV cars and vans to ensure they do not become less efficient and more polluting over time.
19. These standards will be implemented as trading schemes under the Climate Change Act (2008). Each manufacturer will receive allowances according to a benchmarked CO2 emissions performance (in grams of CO2 per kilometre according to the WLTP standard) multiplied by the number of non-zero emission cars or vans sold in the relevant calendar year.
The sum of the CO2 ratings of all non-zero emission cars or vans sold in each year (the regulated activity) must be covered by allowances. Manufacturers may trade excess allowances freely at any price.
20. We propose that manufacturers’ non-ZEV CO2 emissions targets for the car and van schemes will be determined by the average CO2 emissions ratings of new non-ZEV cars and vans sold by that manufacturer in 2021. These targets would be constant for the duration of the regulation and would not be adjusted according to weight, powertrain mix or other factors.
21. Micro volume manufacturers (selling fewer than 1,000 cars or vans per year) will continue to receive exemptions from the CO2 emissions standard. All manufacturers selling at least 1,000 cars or 1,000 vans (within the respective schemes) will receive targets using the above method.
SPVs, including WAVs, will be exempted from the non-ZEV CO2 emissions standard, as they are exempted under current UK legislation and therefore cannot be considered when determining the baseline emissions data.
22. As this framework is intended to support a rapid shift to ZEVs we propose that manufacturers exceeding their ZEV mandate targets may use excess ZEV allowances to count toward their non-ZEV CO2 obligation.
Specifically, ZEV car allowances may be converted into allowances for the car non-ZEV CO2 emissions scheme; and ZEV van allowances may be converted into allowances for the van non- ZEV CO2 emissions scheme. The rates of conversion shall be determined based on the average WLTP ratings of new non-zero emission cars and vans in 2021.
23. Recognising that manufacturers have invested in a variety of technologies to reduce their fleets’ overall CO2 emissions, we propose that during the first three years of the new framework (2024-2026), manufacturers may use excess allowances in the non- ZEV CO2 trading schemes to assist in compliance with the ZEV mandate targets.
Specifically, 167 car CO2 allowances may be exchanged for one ZEV car credit and 216 van CO2 allowances may be exchanged for one ZEV van credit; these transfer rates reflect the real-world carbon contribution of non-ZEV vehicles. The number of credits that may be earned in this way is limited to 25% of a manufacturer’s ZEV target in each year.
24. If a manufacturer cannot meet their non-ZEV CO2 emissions standard after trading and/or the transfer of ZEVM allowances, they must make a payment equivalent to £86 per gram of CO2 per kilometre exceedance over the non-ZEV fleet multiplied by the number of vehicles. This is equivalent to the fine structure under existing UK CO2 emissions regulation.
25. Considering the dynamic nature of the ZEV market and recognising that in some extremely limited cases of unprecedented events compliance might become impossible, we propose to monitor market conditions and update the regulation as needed, with any major changes subject to advance notice and consultation.
