Further Memorandum by The Society of Motor
Manufacturers and Traders (CC24A)
1. INTRODUCTION
The Society of Motor Manufacturers and Traders
(SMMT) welcomes the Environment, Transport and Regional Affairs
Inquiry into issues relating to the Climate Change Levy. The motor
industry takes its environmental responsibilities very seriously
and is committed to working with the Government to further reduce
the environmental impact of its products and processes.
The SMMT shares the CBI's concern that the levy
is a blunt economic instrument unlikely to deliver in terms of
emissions reductions. We are concerned about the potential impact
the climate change levy would have on automotive manufacturing
in the UK.
2. IMPACT ON
THE AUTOMOTIVE
INDUSTRY
The levy will have a disproportionate impact
on the automotive sector. A survey of members based on the initial
illustrative rates in the Treasury's consultation document indicated
that vehicle and component manufacturers would face a net increase
in energy costs of between 12 and 20 per cent. Such increased
could see some companies total costs increase by as much as 3
per cent.
In a sector that is subject to intense global
competition, which is already under pressure from the high value
of sterling, this could have a very significant impact on competitiveness.
The major vehicle and component manufacturers are global companies
with production facilities located across the world. The pressures
to reduce costs and improve productivity at plant level are intense,
with important investment decisions determined on very marginal
cost differences.
We urge the committee to recommend that the
Government publishes a cost comparison (per tonne reduced) of
each proposed measure to reduce carbon dioxide (CO2)
emissions, and that these cost comparisons are calculated for
each individual sector.
3. PRE-BUDGET
REPORT
The Chancellor's Pre-Budget report announced
some concessions. The rate of the levy has been reduced by approximately
30 per cent, the amount of public funds available to improve energy
efficiency has increased to £150 million and companies investing
in energy efficiency measures in 2001-02 will receive a 100 per
cent tax allowance. In addition it was announced that energy derived
from renewable sources or from combines heat and power generation
would be zero-rated.
These measures will soften the impact of the
levy, but it still implies net increases in costs that could be
damaging. The impact on SME's will be especially hard.
4. IMPROVING
ENVIRONMENTAL PERFORMANCE
The motor industry recognises the importance
of reducing carbon dioxide emissions. It has made significant
progress in making its production processes more efficient. Component
and vehicle manufacturers are continually implementing new measures
aimed at better managing the environmental impacts of their production
activities. Government's own figures indicate that by 2000 the
vehicle engineering sector will be producing 27 per cent less
carbon than in 1990. This is despite a 30 per cent increase in
vehicle production.
Many companies in the UK automotive sector have
already put in place Environmental Management Systems certified
to ISO14001, (an internationally recognised certification standard)
and/or EMAS (Eco Management and Audit Systems), to ensure consistently
high standards of operation. The practice of supply chain auditing
carried out by the certified companies will serve to extend the
adoption of Environmental Management Systems within the automotive
sector.
5. MOTOR INDUSTRY
VOLUNTARY AGREEMENTS
The automotive industry has a significant record
of achievement in negotiating voluntary agreements at a European
and UK level aimed at improving environmental performance.
The European motor industry has entered a unique
voluntary agreement with the European Commission to reduce carbon
dioxide from new passenger cars by 25 per cent by 2008. The Commission
estimates that the agreement will deliver 15 per cent of the savings
required to meet the EU's Kyoto commitments. It needs to be remembered
that 80 per cent of the life time carbon emissions of a vehicle
come from its use.
The motor industry is also addressing the reduction
of other greenhouse gases. The SMMT is a signatory to the UK Automotive
Air Conditioning Industry Declaration of Intent on the Use of
HFCs (hydrofluorocarbons). This agreement commits the industry
to follow guidelines, investigate alternative refrigerants with
lower global warming potential (GWP), and to use HFCs with short
atmospheric lifetimes and low Global Warming Potentials. A report
is prepared annually for the DETR on the use of HFCs in vehicle
air conditioning equipment in the UK, based upon current best
estimates of emissions from this source.
The manufacturer of a motor vehicle uses less
energy, causes less pollution and uses more recycled material
than every before. Currently, when a vehicle comes to an end of
its life, about 75 per cent of its total weight is either recycled
or re-used. Automotive residue represents just 0.3 per cent of
the total amount of controlled waste currently going to landfill
within the UK. In the UK, the ACORD voluntary agreement was signed
in 1997 between the trade associations of the motor industry and
other sectors involved in the disposal process for end-of-life
vehicles (ELVs). The ACORD agreement commits those involved to
improve the recovery of material from the current average of 75
per cent, to 85 per cent by 2002 and 95 per cent by 2015.
6. CONSULTATION—COMMUNICATING
AND LISTENING
The motor industry is playing a very active
role in responding to the Government's proposal for a climate
change levy and is keen to share its collective expertise. The
SMMT has provided comprehensive responses to the many consultation
initiatives in this area and sought to explain industry concerns
to officials. We have, however, been disappointed by an apparent
reticence to accept our concerns, alternative suggestions and
opportunities for more open, detailed or joint impact assessments.
We are also concerned that where new or modified taxes are introduced
with environmental aims they should be subject to thorough economic
and environmental assessment.
7. EXTENDING
THE QUALIFYING
CRITERIA
The SMMT has been in close discussions with
the Government linking improved energy efficiency to a levy discount
(see attachment1). The Treasury has indicated that it will only
allow discounts to sectors covered by IPPC regulation. This means
that the majority of the automotive sector will be prevented from
negotiating an agreement.
The SMMT would urge the Environment, Transport
and the Regions Committee to recommend broader qualifying criteria.
It is proposed that discounts should be given to companies that:
— have an environmental management
system in place (this could be demonstrated by ISO 14001 certification);
— have made a public commitment to
improve the energy efficiency of their sites and products (this
could be demonstrated by signing up to the SMMT voluntary agreement
on sustainable development or an existing energy efficiency scheme);
— commit to undertake actions to ensure
they are moving towards the ACE (all cost effective actions) position;
— report on their energy use/efficiency
at their sites and the energy efficiency of their products; and
— are open to external audit.
8. CONCLUSION
The motor industry in the UK wishes to make
a positive and constructive contribution to achieving the Government's
long term environmental objectives. We are very concerned about
the impact an energy levy could have on the competitiveness of
the UK automotive sector and would like to see alternative qualifying
criteria for climate change levy discounts. The industry's commitment
to reduce CO2 emissions from new passenger cars by
25 per cent by 2008, the investment that will be required to achieve
it and the progress already made in improving the efficiency or
our production processes demonstrates the seriousness of our intent.
November 1999
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