Memorandum submitted by the Low Carbon
Vehicle Partnership
1. SUMMARY
1.1 This Memorandum has been prepared by
the Low Carbon Vehicle Partnership, the organisation established
in 2003 as an outcome of the Powering Future Vehicles (PFV) Strategy
to accelerate the shift to low carbon vehicles and fuels in the
UK.
1.2 Limited progress has been made by DfT
towards carbon reduction targets. Road transport CO2
emissions have increased by 8% since 1990, but are projected to
stabilise in the period to 2010 as a result of the introduction
of biofuels. The specific contribution DfT is making towards CO2
reduction targets has not been clarified. Progress towards targets
for low carbon buses and cars in the PFV Strategy are likely to
be missed by a considerable margin. CO2 emissions from
new cars are decreasing at 1.2% pa and, at this rate UK average
CO2 emissions from new cars will be 164g/km by 2008
compared to the EU average target of 140g/km.
1.3 Whilst there is generally good coordination
between the organisations responsible for delivering the PFV Strategy,
the resources and policy mechanisms available for delivering the
Strategy are not sufficient. The suspension of the TransportEnergy
grant programmes in November 2004 has further restricted the support
available.
1.4 To achieve significant GHG savings from
road transport before 2010 would require measures to reduce vehicle
use or fuel consumption. There is very little scope for bringing
forward new vehicle technologies due to the long development cycles.
The introduction of the Renewable Transport Fuels Obligation (RTFO)
is welcomed and estimated to reduce transport emissions by 1.6MtC
by 2010. However, overall GHG emissions improvements will not
be as great as this due to the GHG emissions arising from agricultural
cultivation and production of the fuels.
1.5 There is greater scope for technology
improvements by 2020, though this timescale is still too short
to achieve a major technology shift. LowCVP supports an integrated
approach to reduce road transport CO2 emissions with
technology-neutral market mechanisms used to promote the shift
to low carbon vehicles and fuels.
1.6 LowCVP research has shown a range of
activities is needed to stimulate the market for low carbon vehicles
and fuels and that current incentives are insufficient to achieve
accelerated progress. The capacity of the UK, in isolation, to
bring forward low carbon technologies in a global vehicle market
is, however, limited.
2. THE LOW
CARBON VEHICLE
PARTNERSHIP
2.1 The LowCVP was established in 2003 to
accelerate the shift to low carbon vehicles and fuels in the UK.
It aims to help deliver carbon reduction targets and give commercial
advantage to UK business. The Partnership is a multi-stakeholder
forum with over 190 members including many leading car manufacturers
and fuel suppliers, major fleet operators, environmental and consumer
groups, academics and government departments. This response has
been prepared by a committee comprising all key stakeholder groups.
2.2 The Partnership undertakes activities
to both encourage the supply and raise demand for low carbon vehicles
and fuels. This includes providing guidance on the priorities
to stimulate market development. Some of our recent key achievements
and principal current activities include:
— Brokering a voluntary agreement
with the UK motor industry to introduce colour-coded fuel economy
labels in all new car showrooms. On-going studies are evaluating
the effectiveness of the label through research into dealer and
consumer attitudes and implementation rates.
— Input to the feasibility study
for a Renewable Transport Fuels Obligation—focussed on the
development of sustainability assurance and carbon certification.
Current activities involve the development of a sustainability
standard to complement RTFO reporting requirements.
— Oversight of the establishment
of Cenex, a public-private Centre of Excellence for Low Carbon
and Fuel Cell Technologies. The LowCVP is represented on the Board
of the company.
— The LowCVP road transport Challenge:
a process initiated by the Partnership to bring forward innovative
proposals for delivering carbon reductions from the road transport
sector. The best entries will be presented at a conference in
June 2006.
2.3 LowCVP's response is structured in response
to the specific questions posed by the committee.
3. WHAT PROGRESS
HAS THE
DFT MADE
AGAINST KEY
CARBON REDUCTION
TARGETS?
3.1 The principal carbon reduction target
to which DfT contributes is the Joint Public Service Agreement
(PSA) with DEFRA and DTI to:
— Reduce greenhouse gas (GHG)
emissions to 12.5% below 1990 levels in line with our Kyoto commitment;
and
— Move towards a 20% reduction
in carbon dioxide emissions below 1990 levels by 2010.
3.2 The specific contribution DfT makes
towards the PSA target has not been clarified. Emissions trends[4]
show that the Kyoto target will be met (subject to achieved emissions
reductions being maintained). Recently published DTI projections[5]
estimate GHG emissions reductions will average 19.6% between 1990
and 2008-12. Net emissions of CO2 fell by 5.6% between
1990 and 2004 and are projected to be 10.6% below the base year
by 2010. This equates to a 15-16 MtC gap in reductions between
the forecast and target.
3.3 Since 1990, CO2 emissions
from road transport, have increased by 8% from about 30 to 33MtC
in 2004—due largely to a 22% increase in vehicle kilometres.
Emissions from freight transport, particularly light duty vehicles,
have grown more quickly than those from passenger cars. DTI projections
anticipate emissions will continue to rise from 30.1MtC (1990)
to 34.6MtC in 2010. These projections do not include the impact
of biofuels (that are estimated to deliver a potential saving
of 1.6MtC) and will stabilise road transport emissions in the
period to 2010. It should be noted that well-to-wheel GHG savings
arising from increased use of biofuels will be significantly less
than this—as discussed in paragraph 6.2. Beyond 2010 transport
emissions are projected to continue to grow to 36.2MtC in 2020—although
these projections ignore any future measures to continue to improve
vehicle efficiency or future policy initiatives.
3.4 Although not an official Government
target, the Transport 10 Year Plan assumed the EU Voluntary Agreement
target (to reduce average CO2 emissions from new cars
to 140g/km) would be met in the UK. The assumption was calculated
to deliver a 4MtC saving—enabling road transport CO2
emissions to remain broadly stable despite the large growth in
overall vehicle km within the Plan. The 2004 Transport White Paper
diverged from the ambitious assumption in the 10 Year Plan and
included a projection of future average CO2 emissions
from new cars of 152 g/km by 2008. New car CO2 emissions
have improved by an average of 1.2%pa since 1995. This rate of
progress will achieve a UK average CO2 emission from
new cars of around 164g/km by 2008 and enable the UK to achieve
the original 140g/km target by 2022.
3.5 DfT has also established targets for
low carbon cars in the PFV Strategy. Progress towards, and the
appropriateness of these targets, is discussed in Section 8.
4. ARE THE
DFT'S
CARBON REDUCTION
TARGETS UNDERPINNED
BY A
COHERENT STRATEGY
ACROSS ITS
FULL RANGE
OF ACTIVITIES?
4.1 The specific contribution DfT is making
towards the PSA CO2 reduction targets has not been
clarified and no sector specific targets for transport therefore
exist. Many LowCVP stakeholders believe there would be a clearer
policy focus on transport CO2 management if DfT had
a defined CO2 target against which its performance
could be measured. An overall target for transport emissions,
owned by the DfT, would require the Department to ensure its aviation
and road transport policies did not conflict with its overall
CO2 target.
4.2 A subsidiary CO2 target for
road transport would provide a framework against which to balance
measures designed to: improve vehicle efficiency, reduce the carbon
intensity of fuels, promote low carbon modes of private transport
and manage freight transport. It would enable the Department to
define policy priorities on the basis of cost-benefit, lowering
the overall cost of managing road transport emissions within the
available cap. It should be noted that taxation and other fiscal
policies have a significant influence on road transport emissions.
Treasury should therefore also contribute towards the delivery
of GHG emissions reductions.
5. DOES THE
CURRENT BALANCE
OF EXPENDITURE
BETWEEN THE
DFT'S
OBJECTIVES ADEQUATELY
REFLECT THE
ENVIRONMENTAL CHALLENGES
IT FACES?
5.1 In general, the LowCVP believes that
additional resources and stronger policy signals are needed to
facilitate market transformation in favour of low carbon vehicles
and fuels to achieve the scale of emissions reductions needed
in the long-term. While DfT funding to deliver environmental objectives
has grown in recent years, it remains small in relation to funding
for complementary economic and social/accessibility objectives.
5.2 The budget allocated specifically to
road transport is a small proportion of total spend on the environmental
PSA target. Furthermore, in 2004-05 and 2005-06 the funds that
were allocated to the Transport Energy programmes to support the
introduction of low carbon vehicles and fuels have not been fully
allocated. This arose from the suspension of the Transport Energy
programmes in November 2004 after concerns that they may not comply
with EU State Aid rules. Of the six programmes submitted to the
EC for approval in early 2005 only two have, to date, proceeded,
an:
(i) Infrastructure Programme—£600k,
to provide grant funding of 30-50% of eligible costs for alternative
refuelling infrastructure.
(ii) Low Carbon R&D Programme—to
provide funding to vehicle developers towards the costs of developing
prototype low emission vehicles.
5.3 Proposed grants for low carbon cars
and buses and programmes to reduce vehicle air pollution emissions
have been suspended. The overall 2005-06 budget for the TE programmes
was £24 million. This included work in delivering advice
to organisations to develop travel plans and improving the environmental
performance of their fleet operations. £250k was also allocated
from this budget for the LowCVP. The expenditure achieved for
2005-06 is not known but estimated to be less than half of that
originally allocated. The LowCVP approached DfT to enquire whether
any unspent funds could be carried forward to future years but
was informed that this was not possible.
6. WHAT, REALISTICALLY,
COULD DFT
ACHIEVE IN
REDUCING TRANSPORT-RELATED
CARBON EMISSIONS
BY 2010 AND
2020?
6.1 To achieve significant GHG savings from
road transport before 2010 would require measures to reduce vehicle
use or fuel consumption. A recent IEA study[6]
provided examples of how fuel consumption can be reduced in the
short-term. Similarly, a submission to the LowCVP Challenge[7]
indicates that a properly enforced 70 mph speed limit would cut
carbon emissions by almost 1MtC pa. However, many LowCVP stakeholders
have reservations as to the acceptability or viability of such
an approach.
6.2 The DfT has claimed that the introduction
of the Renewable Transport Fuels Obligation (RTFO) will reduce
UK road transport GHG emissions by around 3%, the equivalent of
taking 1 million cars off the UK's roads (and equating to about
1MtC saved). Many LowCVP stakeholders have doubts that this level
of GHG saving will be achieved as it requires biofuels to achieve
an average GHG well to tank saving of over 60% compared with petrol/diesel.
The Partnership has produced research[8]
showing the cost and GHG benefits from biofuels vary greatly depending
on how the fuel is produced. Incentives can encourage biofuels
to achieve higher levels of GHG saving. The Government has indicated
in its RTFO feasibility study that it does not propose to introduce
such incentives at the start of the scheme—although it may
do so as part of a further development of the RTFO post-2010.
This decision will affect the level of GHG savings achieved.
6.3 By 2010, there is very little scope
for bringing forward new vehicle technologies due to the long
development cycles. The main emphasis in the short-term should
therefore be to increase the rate of penetration of the best existing
technologies to reduce emissions from new vehicles. By 2010, (assuming
a 1.2% pa improvement in vehicle efficiency—the average
achieved from 1995 to 2005), new car CO2 emissions
will average about 160.5g/km compared to 170.5 in 2004. Even so,
by 2010, any improvement in vehicle efficiency will only be effective
in less than a third of the vehicle fleet and therefore have limited
impact upon overall CO2 emissions.
6.4 There is greater scope for technology
improvements by 2020, though this timescale is still too short
to achieve a major technology shift (such as that which would
lead to significant numbers of vehicles powered by renewable hydrogen
and/or fuel cells). If a 1.2% pa improvement in new vehicle efficiency
was maintained to 2020 this would reduce UK average new car CO2
emissions to 142.5g/km by 2020 (higher than the EU Voluntary Agreement
target for 2008/9). However, if it was possible to double the
rate of penetration of new technology to 2.4% pa this would enable
UK fleet average new car tailpipe CO2 to be below 120g/km
by 2020.
6.5 There is no consensus amongst different
stakeholder groups as to the rate of possible improvements in
vehicle efficiency and how these should be balanced by measures
to introduce low carbon fuels, achieve modal shift and efficient
freight management. It is also important to note that there is
a limit to the technical developments that the UK, on its own,
can stimulate as the vehicles and fuels markets are European or
global in scope. International agreements for measures designed
to encourage technology change will be more effectual than those
set at national level. National policies will however remain an
important driver to support market penetration of new technology.
7. WHAT SPECIFIC
STEPS SHOULD
THE DFT
TAKE TO
REDUCE ROAD
TRANSPORT CARBON
EMISSIONS AND
CONGESTION OVER
THE NEXT
DECADE?
7.1 Although LowCVP activities focus upon
measures to accelerate a market transformation to low carbon vehicles
and fuels, all stakeholders recognise the importance of other
measures to deliver CO2 reductions including:
— Improved driver behaviour—in
terms of both the type of journeys undertaken and the way in which
the vehicle is driven.
— Better freight distribution.
— Modal shift—in favour
of lower and zero carbon modes.
— Land-use planning—reducing
distances travelled over the longer term.
— Teleworking—to reduce
the need for commuting.
7.2 For measures designed to promote the
shift to low carbon vehicles and fuels, LowCVP stakeholders favour
policies that are technology-neutral market mechanisms. Wherever
possible, these polices should also be designed to assist UK-based
technology providers.
7.3 With respect to fuels, LowCVP stakeholders
have actively supported and encouraged the introduction of biofuels
to reduce the carbon intensity of conventional fuels. The LowCVP
provided considerable input to the Government RTFO Feasibility
Study[9]
focussing on carbon certification and sustainability assurance
systems. The Partnership welcomed the decision to include a reporting
mechanism for GHG saving proposed by the Government as a useful
first step. Many stakeholders however believe that, at a future
date—assuming as soon as a practical system can be implemented—RTFO
certificates should be awarded in proportion to the well to tank
GHG reduction of the biofuel. This would serve to incentivise
GHG savings and avoid "lock-in" to first generation
technologies. Partnership members also support, and are working
to develop, a sustainability standard to help to mitigate wider
environmental and social concerns arising from biofuel production.
The Partnership has also proposed that a strategic environmental
assessment (SEA) be undertaken to identify the potential environmental
effects of increasing biofuel feedstock cultivation and other
environmental effects.
7.4 The Partnership also actively encourages
increased supply and demand for more efficient vehicles and believes
further Government action is needed to stimulate the market. The
graph (below) illustrates the improved efficiency of new cars
sold in the UK. This has been principally achieved through increased
dieselisation, the EU voluntary agreement with vehicle manufacturers
to reduce CO2 emissions and company car tax policy.
Demand for environmentally friendly vehicles however remains weak.
The graph also illustrates that:
(i) UK new car fleet average CO2
emissions are significantly above the EU average. This is due
to the lower rates of diesel penetration and the historic preference
of UK new car buyers to purchase larger vehicles than the EU average.
Similarly high new car CO2 figures are observed in
other more affluent EU states which, like the UK, do not impose
vehicle purchase taxes such as Germany and Sweden.
(ii) UK fleet and businesses are progressively
purchasing smaller and more efficient vehicles—in large
part stimulated by the company car tax regime. In contrast, since
2002, private buyers have tended towards purchasing larger vehicles.
7.5
7.6 Research undertaken by the LowCVP into
car buying behaviour[10]
indicates that a range of activities is needed to stimulate the
market as illustrated in the following figure. Awareness-raising
activities such as Defra's Climate Change Communications initiative
are helpful in preparing consumers to embrace new, "greener"
technologies, but are not sufficient in themselves to significantly
alter buying behaviour. Closing the "attitude-action gap"
requires a combination of initiatives by both industry and Government
including:
— Activities to engage with consumers
and address myths, preconceptions and misconceptions about new
technologies and fuels.
— Marketing to enhance the desirability
of low carbon vehicle models.
— An increased choice of low carbon
vehicle options in all market segments.
— Effective incentives—both
financial and in terms of vehicle amenity value.
7.7 The new car fuel economy label, voluntarily
introduced by the UK motor industry as a result of a LowCVP initiative,
is designed to make consumers more aware of car running costs
and CO2 emissions. Proposals for a "league table"
of the most efficient models in each sector would complement the
label and would be likely to be picked up by major car buying
magazines. Many LowCVP stakeholders support an approach developed
by the Energy Saving Trust and were disappointed that the DfT
has declined to support this initiative.
7.8
7.9 Many LowCVP stakeholders believe current
incentives for low carbon vehicles are insufficient to stimulate
significant demand. Many stakeholders would welcome the reintroduction
of Government-funded grants for low carbon vehicles to encourage
early adopters to purchase new technology. Achieving widespread
market penetration will, however, require market-based instruments
to achieve market transformation. For example; some, but not all,
stakeholders advocate a "Feebate" scheme in which tax
reductions for low carbon vehicles are funded through a purchase
tax on "gas guzzlers". Others have proposed greater
differentials between VED bands. Financial incentives can be complemented
by providing additional amenity value to drivers of low carbon
vehicles—such as preferential parking places and discounts
for road user charging or city congestion schemes. The Government
feasibility study into road user charging showed that the CO2
implications of the policy are highly variable depending upon
the design of the scheme. Many LowCVP stakeholders support designing
road user charging to achieve both environmental and congestion
benefits and would like to see greater consideration of this option.
7.10 LowCVP stakeholders would also wish
to see further attention given to encouraging "green"
public procurement for vehicles. This needs to be guided by clear
criteria based upon the environmental performance of vehicles.
The LowCVP would encourage the use of the Forward Commitment approach
being taken forward by Cenex to reduce the market risk to technological
innovators in the automotive supply chain.
8. HOW APPROPRIATE
ARE THE
POWERING FUTURE
VEHICLES STRATEGY
TARGETS?
8.1 The 2002 Powering Future Vehicle (PFV)
strategy included targets to:
— Achieve 10% of new vehicle sales
below 100g/km tail-pipe CO2 emissions by 2010.
— Achieve sales of 600 low carbon
buses by 2010.
8.2 Progress towards both the PFV Strategy
targets indicates that these are likely to be missed by a considerable
margin. In 2004 (the most recent year for which data is available)
481 cars were sold meeting the low carbon car target which represented
0.02%[11]
of new vehicle sales. There has been no significant increase in
sales in recent years and a very limited number of models achieving
the target are presently available—or are likely to be—by
2010.
8.3 The LowCVP is presently undertaking
a review of the PFV Strategy, the outcomes from which will be
completed by summer 2006. Our initial discussions indicate that
the current cars target is not appropriate. Some stakeholders
have proposed amending the target to achieve a proportion of vehicles
sales to the less exacting VED band B threshold (less than 120g/km).
A much larger number of models is available that achieve this
performance. The market share of cars with CO2 emissions
below 120g/km grew from 2002 to 2004 to about 3% but the pace
of improvement has slowed since then.
8.4 Some Partnership stakeholders have reservations
about the appropriateness of any target which is focussed on increasing
sales of only the most efficient vehicles. While increasing the
proportion of low carbon vehicle sales is clearly desirable, greater
overall CO2 benefits can be achieved by reducing fleet
average CO2 emissions for new cars. One option would
be to establish a UK target based upon average CO2
emissions from new cars. Irrespective of the form of the target,
greater emphasis should be placed upon established policy instruments
that provide a mechanism for the target to be achieved.
8.5 The PFV bus target is also unlikely
to be achieved without transformation of the bus market. In 2004,
5 low carbon buses were sold; in 2005, this rose to 19 low carbon
buses (compared to the 2010 target of 600 buses).[12]
A recent announcement by the London Mayor expressed a wish to
purchase 10 hydrogen buses by 2010 in addition to a number of
cars. Though this development is welcomed—and will provide
essential experience in the operation of fuel cell buses—significant
market penetration of fuel cell buses is unlikely for at least
the next 15 years due to their prohibitive cost. Other low carbon
bus technologies are more likely to make a greater impact in the
short or medium term.
8.6 Alternative mechanisms will need to
be developed to support the introduction of low carbon buses,
such as proposed in the Low Carbon Bus Programme. The programme
is, however, delayed due to the failure to obtain state-aid approval
from the EU.
9. IS THERE
ADEQUATE CO-ORDINATION
BETWEEN ORGANISATIONS
RESPONSIBLE FOR
DELIVERING THE
POWERING FUTURE
VEHICLES STRATEGY;
AND SUFFICIENT
RESOURCES ALLOCATED
FOR THEIR
DELIVERY?
9.1 Generally there is good coordination
between the organisations with responsibility for delivering the
PFV Strategy. These are: the Low Carbon Vehicle Partnership, The
Energy Saving Trust (EST, which manages the TransportEnergy Programmes)
and DfT. EST and DfT are represented on the Board of the LowCVP
and actively participate in the work-programmes of the Partnership.
Through its working groups EST staff routinely report on the progress
of the programmes being operated for DfT. Monthly coordination
meetings are held between LowCVP, DfT, DTI and DEFRA officials
to share information and coordinate activities.
9.2 The LowCVP is also represented on the
Board of Cenex and made an effective contribution to developing
the terms of reference and overseeing the establishment of the
new Centre. A Memorandum of Understanding is being prepared between
LowCVP and Cenex that will clarify responsibilities and identify
areas of collaborative activity.
9.3 At present, there are a number of relatively
small research activities focusing on the development of low carbon
vehicle technologies. These are supported or operated by EST (for
DfT), Cenex, the Society of Motor Manufacturers and Traders Foresight
Vehicle and DTI. LowCVP also runs an Innovation Working Group
which, as part of its remit, seeks to monitor research activities
carried out under the auspices of the above organisations. The
need for improved coordination between low carbon vehicle research
programmes has been suggested by some stakeholders. Better coordination
between all Government departments in the procurement of low carbon
vehicles is also needed.
9.4 Clear responsibility for improving public
understanding and awareness of low carbon vehicles is a current
gap in activities. The Climate Change Communications Programme
operated by DEFRA is raising awareness about climate change but
does not focus on mechanisms to reduce emissions. DfT has commissioned
a number of research studies examining consumer attitudes to climate
change and transport, but has declined to support EST proposals
for developing public understanding. Greater investment in this
area is seen as a priority by many LowCVP stakeholders.
9.5 The funding available for delivering
the PFV Strategy is limited - as discussed in Section 5. The absence
of adequate funding or mechanisms to deliver the targets is the
major contributor to the lack of progress that has been made towards
the Strategy targets. The LowCVP, established as a result of the
Strategy, is funded by an annual grant (budgeted at £530k
for 2006-07) provided jointly by DTI and DfT. Funding is only
committed on an annual basis making long-term planning difficult.
The grant funds the small secretariat plus office costs. There
is no budget available to fund specific work programme activities.
Whilst DfT, DEFRA and members have generously provided sponsorship
of individual activities the absence of any budget to support
the work programme constrains the activities of the Partnership.
February 2006
4 DEFRA 2006, 2004 UK climate change sustainable development
indicator and greenhouse gas emissions final figures. Back
5
DTI 2006, Government's projections for energy and carbon emissions
for the UK. Back
6
IEA, 2005, Saving oil in a hurry. Back
7
Anable et al, 2006, Getting the genie back in the bottle:
Limiting speed to reduce carbon emissions and accelerate the shift
to low carbon vehicles, LowCVP (unpublished). Back
8
LowCVP 2005, WTW evaluation of the production of ethanol from
wheat. Back
9
DfT 2005, Feasibility study for certification within the RTFO. Back
10
LowCVP 2005, Car buyer research report. Back
11
SMMT 2005, UK new car registrations by CO2 performance. Back
12
LowCVP 2006, unpublished data. Back
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