Examination of Witnesses (Questions 131
- 139)
Witnesses: Mr Richard
Tarboton, Head of Business Unit, Transport
and Mr Alex Veitch, Transport Strategy Manager, Energy
Saving Trust, gave evidence.
Question Number
WEDNESDAY 29 MARCH 2006
MR RICHARD
TARBOTON AND
MR ALEX
VEITCH
Q131 Chairman: Good afternoon. Thank
you for your written evidence which we have received and studied.
Could I kick off by saying that one of the Government's white
papers envisaged that carbon emissions from road transport would
be reduced by 2.4 million tonnes by 2020. Do you think that is
likely to be achieved and, if not, how near do you think we might
get to it?
Mr Tarboton: In terms of the context
of that figure, it comes from the energy white paper looking at
the overall reductions, I would think 135 million tonnes total
carbon and a 2.2 to 2.4 reduction from that. Since then there
have been a number of other projections from the Department and
certainly yesterday we have seen a projection of how carbon will
reduce from the 1990 levels which I think is possibly a more up
to date picture to look at. Carbon dioxide from transport has
increased by about 8.7% since 1990 and the DfT are projecting
that it will stay at the same level as it is now by 2010. Do we
think it could be reduced further than that? Yes, I think more
could be done and there are a number of measures which we put
into our paper to indicate that more would be possible and by
2020 a reduction of two to four million tonnes would be possible.
With the current policies in place though we do not think those
reductions will be possible. There are three key areas that we
would see as recommendations for the Government to focus on and
those are firstly market mechanisms, the fiscal and trading type
mechanisms which could be brought in for car purchases to be incentivised
at the lower carbon end of the market. The second area is about
information and advice to businesses and consumers. Back in 1997
we started the approach of recommending A rated fridge/freezers
and appliances to home owners. At that point there were 0.2% A
rated appliances being purchased by the consumer and today, seven
years later, 77% of all fridge/freezers are now A rated. We are
in a similar position with A rated cars. There are very few A
rated cars being sold—it is about 0.02%—and there
is a big opportunity there with better information to achieve
that. The third area is around procurement both from the public
sector and the business sector to put in place policies and procurement
strategies which really drive a leadership position in the market
place for new vehicles to come onto the market so that the individual
consumer can see that they are viable options to purchase, that
big businesses and governments are using these vehicles to initiate
their introduction into the market and then allow the consumers
to pick up that position and grow the market more fully. Those
are the three areas which we think, if they were in place, then
such levels of reduction would be possible.
Q132 Mr Caton: The DfT's Powering
Future Vehicles strategy includes a target for sales of low carbon
buses to reach 600 per year by 2012. Last year sales were just
19; the year before that just five. Why are we so far from reaching
this target?
Mr Veitch: We agree roughly with
the figure you have for low carbon bus sales last year. There
are a number of issues with the low carbon bus market. As we see
it at the moment there is a problem with the ability to use public
procurement as a way to buy a large number of low carbon buses
at once. In London it is possible that TfL could require one of
their tendered routes to run a low carbon bus, a hybrid bus. We
cannot do that outside London unless it is through one of the
quality partnerships so there is less of a top down approach available.
There is an issue about the way the fuel duty is rebated to the
bus operators. There is what is called a Bus Service Operators
Grant and it does not give an incentive for fuel efficiency in
terms of the buses that are used. There has been a long running
debate about whether that can be reformed. One problem is that
there are not grants. We are working with the DfT on a low carbon
bus programme but it is still mired in State Aid problems in the
European Commission. So really there are a number of obstacles.
Q133 Mr Caton: The point you have
made about the Bus Service Operators Grant, at the moment, as
I understand it, it is basically subsidising fuel use and you
have made a proposal that it should be moved to a mileage subsidy.
Why do you think the Government rejected that proposal?
Mr Veitch: It was a consultation
response back in 2002 so it was one of many competing consultation
responses at the time.
Q134 Mr Caton: It seems eminently
sensible. Do you have any clue as to why the Government did not
go along with it?
Mr Veitch: That is really a question
for DfT.
Mr Caton: We will be asking them.
Q135 Mr Hurd: What impact do you
think the adjustments in the Budget last week will make to purchasing
decisions in the market place?
Mr Tarboton: We think it is a
very important initial step; it is a good signal. Signals to the
market are important when it comes to labelling so we think that
labelling is an important initiative and it is important to put
some financial mechanism behind the label so it is good to have
an A to G structure in place which is now the same as white goods.
At the top end of the Vehicle Excise Duty area we do not think
there is going to be a major shift in changes of decisions, not
a major change in the F and G bands. In the B category there are
some bigger opportunities to see a shift there where over the
last three years we have seen about 3.3% of the market under 120
grams with no real growth. This could change that.
Q136 Mr Hurd: The evidence we have
just heard suggests that that segment of the market is a highly
specialised market; it is going to need more than a few quid on
VED to get it going.
Mr Veitch: My understanding of
the LowCVP's position was that they are saying that cars that
fall into Band A would be a specialised market. We disagree with
that to some extent. We have been running a programme called the
Ultra Low Carbon Car Programme for some years for the DfT and
looking at whether a family sized Band A can be made. The answer
is that yes, you can. We understand that one of the projects with
Peugeot/Citroen is that they are looking at that in terms of using
some of the technology. I do not think it has to be all micro
cars in that band but we can agree to disagree with the Partnership
about that perhaps. I think the other issue is that what the Partnership
said that Band B cars are the more normal cars, there are more
options available. We did some research in 2004 that showed that
there is already a margin between Band B and Band C and there
is some evidence of people shifting from a Band C car to a Band
B car. Under the old VED where there was a £30 differential;
under the new VED it has doubled, it is now a £60 differential.
The other thing that did not really get picked up in the press
but was really important in the Budget was the changes to company
car tax that for the cars under 120 grams—ie Band B cars—there
is a much lower, 10%, tax rate so you get a third off your tax
if you buy a Band B car for company use. So lower rates for private
individuals, lower for company cars.
Q137 Mr Hurd: Do you think an opportunity
was missed at the other end of the range?
Mr Tarboton: I think the simple
answer is yes. I do not think the Vehicle Excise Duty is the only
way to look at how to change purchase decisions at that other
end of the range. There has to be more information and advice
and there also has to be consideration of a more fundamental shift
in the market mechanisms currently in place. The reason why I
say that is a point which was raised earlier in discussion with
the Committee which is that selling vehicles in the F and G ranges
tend to be vehicles which are quite large, premium, high priced
vehicles. The incentives in terms of commission for sales people
tend to be higher and therefore no matter what you do in terms
of fiscal measures or information you are still going to be fighting
against an economic driver which just drives those sales to continue.
What we see as necessary is something like a fee-bate system or
a certificate trading system which would allow profits to be made
from low carbon vehicles and if you can change the balance to
create greater profits for the kind of B rated cars than profits
in the F and G bands then I think you will get more advertising,
more promotion, more aspirational elements being brought into
those vehicles so that people start purchasing them.
Q138 Mr Hurd: What is the key shift
required to make the change the economic model of industry?
Mr Tarboton: It is about introducing
that certificate of trading. If you had a certificate trading
system which required each manufacturer to have certificates allocated
to every car that they sold based on the carbon of that vehicle
they would then have to trade their certificate and, if they produced
a number of high carbon cars, there would be a negative balance
and they would have to purchase green credits. At the other side
of the scale you could have a company selling a number of greener
cars, hybrid cars and they would generate a lot of green certificates
and they would be able to sell those certificates and generate
a profit based on the number of greener cars which they were selling.
I think this is something which has been talked about for a number
of years; it has been bounced around in the US and in Europe.
There is the opportunity to put it in place in the UK and for
that to work in a practical, revenue neutral sense I would really
propose something to produce a fundamental shift should be brought
in as soon as possible.
Q139 Mr Hurd: What about other measures
such as the colour coded labels? Have you tested consumer reactions
to those as to whether they make a difference to purchase decisions?
Mr Veitch: We did test it before
the label was introduced and we were part of the Partnership trying
to agree that the industry should do a label and we applaud their
voluntary approach to doing that. We have found in focus groups
that people have seen those traffic light style labels many times,
especially on fridges, and were very supportive of seeing them
on cars. The only research that has been done on the label now
it is in place has been: is it being used? The Partnership has
been leading on that research. We would certainly be interested
in the studies and evaluating the success of the label going forward.
Mr Tarboton: Just to add to that,
in our more analytical research rather than market research on
the label we have looked at the car buying process and compared
it to some of our work that we have done with fridge freezers
and white goods et cetera. The time it takes for anyone to purchase
a car is a much longer time frame, you are looking at three to
six months quite often and during that time there are a number
of information sources that somebody will go to. On the whole
most people talk to friends and family and use magazines like
What Car? and other buyers' guides and they will generally
buy about three copies of them before purchasing a car. It is
important to recognise that the label is only present in the show
room and there is not a comparative visual tool available to a
consumer to be able, once they have seen that car in the showroom
which has a D rating on it, to compare that straightaway to another
car of equal size in a similar type of application and see whether
similar cars are rated B or C. We think the label is one way to
get some information out there but what is needed is more information
of a comparative nature that gives a list of all cars in that
category of, say, family hatchbacks so that a consumer can see
straightaway which are the best.
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