Memorandum submitted by the Society of
Motor Manufacturers and Traders Ltd (SMMT)
The Society of Motor Manufacturers and Traders
(SMMT) is the leading trade association for the UK automotive
industry. SMMT provides expert advice and information to members
as well as to external organisations. It represents more than
500 member companies ranging from vehicle manufacturers, component
and material suppliers to power train providers and design engineers.
The motor industry is an important sector of the UK economy. It
generates a manufacturing turnover of around £45 billion,
contributes well over 10% of the UK's total exports and supports
around 850,000 jobs.
SMMT welcomes the opportunity to contribute
to the Environmental Audit Committee's inquiry into "Climate
Change: The UK Programme 2006", in which we focus on the
role of road transport. In March 2005 we responded to the UK Government's
Climate Change Programme Review on behalf of the UK automotive
sector. SMMT also publishes, on behalf of the industry, an annual
CO2 report, which, collectively, shows a 10.7% reduction
in average CO2 emissions from new cars registered in
the UK between 1997 and 2005. The latest report, published in
April can be found at www.smmt.co.uk/publications and a copy is
enclosed [not printed].
SMMT and our members in the UK automotive industry
are fully committed to the environmental responsibilities of the
sector throughout the life cycle of our products. We publish an
annual sustainability report into the environmental performance
of our members' manufacturing processes in addition to that of
the vehicles themselves and their disposal. The latest report,
published in October 2005, is available at www.smmt.co.uk/publications,
and a copy is enclosed [not printed].
1. EXECUTIVE
SUMMARY
1.1 The Government's 2006 Climate Change
Programme Review (CCPR) does not necessarily represent a comprehensive
long-term environmental strategy for the UK, but instead provides
details of the general policy direction being taken by Government
at the current time and in the near future. Our industry would
have liked a proper assessment on the contribution of new technology,
such as second generation biofuels, and behavioural changes, such
as through eco-driving and low carbon choice, to reducing CO2
emissions from road transport.
1.2 The automotive sector supports the Government's
recognition of the "partnership approach" as a core
principle to reducing CO2 emissions. Alongside vehicle
technology, there are many factors that can contribute to reducing
road transport emissions, such as fuel quality, behavioural change
and improved consumer information. Our industry was fully involved
in the CARS 21 process which endorsed an "integrated approach"
to achieving public policy goals in environmental and safety issues
and we are keen to engage with Government on how to make the "integrated/partnership
approach" a reality.
1.3 Government is heavily reliant on phase
two of the EU emissions trading scheme (ETS) to achieve its overall
emissions targets and, specifically for road transport, the Renewable
Transport Fuels Obligation (RTFO) to achieve CO2 reductions.
Proposals to include surface transport emissions within either
a UK or EU trading scheme are of deep concern to industry and
we seek urgent clarification from government as to its assessment
of the workability.
1.4 SMMT and our members are keen to promote
the immediate benefits biofuels can have on the UK vehicle parc
(the current parc can already run on a five% blend) and are pleased
the Government has recognised these under the RTFO. However, we
are disappointed that the Government did not take the opportunity
within the CCPR to provide support for second-generation biofuels.
If long-term confidence in the market is to be assured going forward
beyond 2010, the Government's fiscal incentives and certification
under the RTFO should require strict adherence to existing and
future fuel quality standards.
1.5 Our industry has been frustrated at
the disjointed nature of grant funding for clean vehicles and
fuels under the DfT's Transport Energy programme. The essence
of the programme, to ensure long-term planning and investment,
has been replaced with uncertainty and market disruption as further
potential CO2 savings have been lost. SMMT therefore
welcomes the European Commission's recent announcement that proposals
for a Low Carbon Car Fund do not breach State Aid rules. The path
has now been cleared for the Government to provide long-term support
to encourage the market development of clean, low carbon vehicles
in the UK.
1.6 The Energy Review is intrinsically linked
with the CCPR and government must therefore ensure that policy
measures across the two flagship strategies are consistent and
not contradictory. Long-term certainty and security of supply
is crucial to the competitiveness of our sector, operating on
the global stage. SMMT urges the Government to embrace a technology-neutral
approach to energy supply and support CO2-efficiency
in power generation and use.
2. QUESTIONS
Q1. The Prime Minister continues to identify
climate change as "probably the greatest long-term challenge
facing the human race." Does the 2006 Climate Change Programme
represent a realistic strategy to prepare the UK to meet this
challenge?
2.1 The Government's long-awaited Climate
Change Programme Review (CCPR) was widely expected to be a comprehensive
review that would define the Government's strategy to achieve
its commitment to a 20% reduction in carbon dioxide (CO2)
emissions by 2010 (since revised in the CCPR to a 15-18% reduction),
and put the UK on a pathway to a 60% reduction by 2050.
2.2 However, the Government has acknowledged
that the programme "is not the final word" because so
many other reviews have yet to conclude, including the Energy
Review, Stern Review into the economics of climate change and
the current consultation on phase two of the EU Emissions Trading
Scheme (ETS).
2.3 With this in mind, it is difficult to
see how an incomplete Climate Change Programme can represent a
realistic strategy on its own, rather it indicates the general
policy direction in which the Government is heading to tackle
this global challenge, with some individual policy commitments
established for the short to medium term.
2.4 A central principle running through
the CCPR is its emphasis on a "partnership approach"
and the importance of individual responsibility as key to meeting
the Government's CO2 targets. SMMT and our members
have for some time expressed our support for an "integrated
(or partnership) approach" to reducing CO2 emissions
and we therefore welcome this principle being established at the
core of government policy development.
2.5 The CCPR acknowledges the important
role of vehicle use, particularly "as the economy grows,
peoples travel much further than they used to…as they get
more prosperous, they also tend to choose to travel in a way that
uses more carbon" (page 61, CCPR). With this in mind, it
is important to recognise that around 85% of total CO2
emissions from road vehicles are emitted when the vehicle is being
used on the road[65].
2.6 The automotive industry was fully involved
in the CARS21[66]
process which concluded in December 2005 with a final report,
a series of recommendations and a roadmap to be taken forward
through national and European institutions, including the European
Commission (which is due to publish its response communication
later this year). This agreement by a wide range of stakeholders,
including the UK Government, established the importance of an
"integrated approach" to public policy goals in environmental
and safety issues, involving vehicle manufacturers, oil/fuel suppliers,
repairers, customers/drivers and public authorities. The key now,
therefore, is for government, in partnership with industry, to
ensure the "integrated approach" becomes a reality and
that the principles agreed in CARS21 are established as common
practice both within the UK and across all EU member states. Enclosed
for your information (and in strict confidence) is a draft of
a "mind map" being developed by SMMT to highlight how
we view the "integrated approach" operating in practice
to reduce CO2 emissions from road transport [not printed].
2.7 For our part, SMMT and our members have
already reached two important milestones to an "integrated
approach": the voluntary roll-out of the new colour-coded
label, now on display at more than two thirds of showrooms across
the UK; and the publication of "Drive Green, Drive Safely",
the motor industry's guide to sustainable motoring, offering consumers
a guide to the purchasing, maintaining and disposing of their
vehicles (a copy of the guide is enclosed) [not printed]. The
automotive sector is also actively pursing the "integrated
approach" through its membership of the Low Carbon Vehicle
Partnership (LowCVP). Clearly, consumer education and improved
information will help motorists to better understand the environmental
impact of their behaviour—consumer attitudes and behaviour
can be either core enablers or core barriers to environmental
targets.
2.8 The announcement in the CCPR of an annual
emissions report to Parliament is a sensible suggestion that is
in line with the principles of open government and should provide
transparency in the monitoring and reporting of greenhouse gas
emissions and measures to reduce them both by government and the
sectors concerned. However we await further details from government
as to the content and scope of the report. SMMT's annual reports
on sustainability and CO2 are available to contribute
to this process.
2.9 Apart from these specific announcements
outlined in the CCPR, the Government is already taking forward
several key policies, the most important of which is phase two
of the EU Emissions Trading Scheme, from which it is projecting
savings of between 3-8 million tonnes of carbon (MtC) between
2008 and 2012. It is clear that the Government is heavily reliant
on the scheme in order to achieve its overall emissions targets.
For our industry, emissions projections now play a crucial role
in the number of allowances our installations will receive.
2.10 As part of the wider plans for emissions
trading, the CCPR confirmed the UK Government's proposal to include
surface transport emissions in the EU ETS and indicated the UK's
consideration of introducing the measure unilaterally. SMMT is
deeply concerned by the implications of these proposals, particularly
a unilateral approach in the UK. We seek urgent clarification
from government as to its assessment of the workability of a UK
and/or EU-wide system. As an industry we have experience of operating
within both the UK and EU emissions static sources trading systems.
Based on that experience, we are concerned by the implications
of these proposals for the competitiveness of industry and the
prohibitively complex nature of implementing and administering
such schemes.
2.11 The Renewable Transport Fuels Obligation
(RTFO) is expected to deliver 1.6 MtC of the total savings (net).
Biofuels represent an important aspect of the integrated approach
to reducing CO2 from road transport. All of the current
vehicle parc can run on the 5% blend required by government by
2010, providing immediate opportunities for CO2 savings.
Indeed some manufacturers already provide vehicles capable of
running on higher blends. The automotive industry supports high
quality biofuels that are sustainable and have optimised carbon
savings. However, if confidence in the market is to be assured
going forward beyond 2010, the Government's fiscal incentives
and certification under the RTFO should require strict adherence
to existing and future fuel quality standards.
2.12 The motor industry is in discussions
with the oil industry and other stakeholders through the European
Committee on Standardisation (CEN) to develop future European
standards that enable the use of higher percentage biofuel blends
in all new vehicles (10% blends—E10, B10). It is also worth
noting that in addition the contribution of road transport biofuels
to climate change abatement also critically depends on:
— the actual supply and use of biofuels
in the UK as a reaction to global market developments as well
as the incentive and regulatory structure emerging in the UK and
EU;
— the actual carbon balance of biofuels
produced and used in the UK which has been demonstrated to vary
widely depending on feedstock, production and conversion process
and use efficiency;
— the sustainable supply of biofuels;
— the development of advanced, second
generation biofuels; and
— the Government's future energy strategy
and competing priorities for the best use of biomass within the
EU. Whilst climate change abatement features most prominently
in UK discussions on the use of biomass, the EU Biomass Action
Plan clearly states security of supply and agricultural policy
objectives as equal drivers for greater bioenergy production and
use in Europe.
Q2. Does the Government need to do more,
and if so what, to try and ensure that it meets the 20% reduction
in carbon dioxide emissions by 2010?
2.13 The Government has acknowledged that
a 20% reduction in CO2 emissions is unlikely to be
achieved by 2010 and therefore scaled back its projections to
15-18%.
2.14 We are concerned with the figures currently
used by Government that shape long-term road transport policy.
The Department for Transport (DfT) and Department for Trade and
Industry (DTI) modelling show marked differences between each
other, as a direct result of the different assumptions they make.
DfT projections suggest little change, if not a fall in road transport
emissions by 2020 from current levels, whilst DTI figures suggest
an almost 20% rise in emissions. Establishing a single UK Government
projection on emissions is therefore crucial in the first instance.
2.15 The net increase in road transport
CO2 emissions has been linked in the CCPR to an overall
increase in vehicle use, and in particular the increased demand
for services. Therefore, government should, if it is to meet its
objectives, ensure it adopts as its guiding principle an integrated
approach to reduce road transport CO2 emissions. The
European Commission, Member States, vehicle manufacturers, oil/fuel
suppliers, repairers, customers/drivers and public authorities
all have a role to play in achieving these objectives.
2.16 The contribution of consumers/motorists
to environmental targets is an important aspect of the integrated
approach. The "attitude action gap", which signifies
the difference between what people publicly agree to do and what
they actually do in practice, provides a good case study for an
integrated approach and how better education on roles and responsibilities,
by government and industry, would improve this gap. Ultimately,
motorists can better understand the environmental impact of their
driving behaviour and purchasing decisions through improved education
and consumer information.
2.17 Appropriate fiscal measures and incentives
are also need to promote certainty and planning for business investment
for the market uptake of clean low carbon vehicles and fuels.
The UK's current strategy of three year planning compares unfavourably
with the likes of Germany, whose 10 year fiscal regime provides
much more certainty for investment and confidence in the end product.
2.18 In 2005, the DfT's flagship Transport
Energy grant funding programmes for clean vehicles and fuels ceased
without replacement programmes being put in place, following previous
years of "stop-start" in grant funding. The current
lack of certainty has disrupted the market and hindered further
potential CO2 savings. The essence of any funding programme
is to ensure long-term planning and investment to kick-start the
market. We therefore welcome the news that the European Commission
has announced that proposals for a Low Carbon Car Fund—in
which cars emitting 115 g/km CO2 or less would be eligible
for a government grant of between £300-1,000—do not
breach State Aid rules. Incentives are a fundamental way to drive
the market and we believe the path has now been cleared for the
Government to outline its long-term strategy of support as soon
as possible.
Q3. To what extent, if at all, will the outcome
of the Energy Review affect the implementation of the climate
change programme?
2.19 The implementation of the CCPR and
the Energy Review are intrinsically linked, particularly in terms
of the Government's strategy to combat climate change and reduce
UK CO2 emissions. Government will need to carefully
balance the findings of the Energy Review against measures within
the CCPR to deliver a consistent policy framework towards environmental
objectives.
2.20 Government's role is to ensure full
coordination of energy policy in the UK and set a long-term framework.
The framework should give fiscal and regulatory certainty, encouraging
investment and leaving as many decisions as possible to a well-designed
and properly functioning market. The overall objective should
be to achieve reliability in CO2-efficient energy supplies
whether imported or generated in the UK.
2.21 SMMT and our members would urge the
Government not to concentrate on only a few different options
for energy supply but to embrace the widest possible range of
technologies that support CO2-efficient power generation
and use. The UK automotive industry, like all modern industrial
sectors, seeks certainty and the ability to work in a flexible
and competitive environment. A technology-neutral approach to
energy supply and demand, based on the whole life-cycle of vehicles,
is therefore sought by our industry.
2.22 Our industry remains fully supportive
of the Government's target for a 60% reduction in carbon emissions
by 2050. Previous studies (including the DTI's Performance and
Innovation Unit's energy paper four years ago) suggest that for
the UK to meet its 60% CO2 reduction by 2050, hydrogen
would have to play a significant role within the transport sector.
The global automotive industry continues to heavily invest in
research in this field, with some manufacturers confident that
hydrogen will become their long-term default fuel. However, for
hydrogen to match consumer expectations on road transport mobility,
many hurdles have yet to be cleared, not least on safety, storage
and appropriate infrastructure. On current evidence, the commercial
use of hydrogen for road transport is 20 years away from becoming
a reality.
May 2006
65 Around 10% of total CO2 emissions are
emitted when a vehicle is produced and 5% are produced when a
vehicle is recycled as an End of Life Vehicle (ELV) (Source: LIRACAR). Back
66
Competitive Automotive Regulatory System for the 21st Century,
see http://ec.europa.eu/enterprise/automotive/pagesbackground/competitiveness/cars21finalreport.pdf Back
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