Consultation outcome

Government response and outcome to technical consultation on zero emission vehicle mandate policy design

Updated 30 March 2023

Introduction

The government is taking action to tackle climate change and decarbonise the UK’s fleet of vehicles in a way that will create new, high-value jobs, stimulate investment and drive innovation. British industry can continue to lead this global transition as the UK realises the commitment to end the sale of all new petrol and diesel cars and vans by 2030, and for all new cars and vans to be zero emission at the tailpipe by 2035.

Last autumn, following the green paper on a New Road to Vehicle CO2 Emissions Regulatory Framework for the UK consultation, the Net Zero Strategy confirmed that the UK will adopt a zero emission vehicle (ZEV) mandate.

From 1 January 2024, ZEV targets will require an increasing percentage of a manufacturer’s annual new car and van sales in the UK to be zero emission until reaching 100% in 2035. This will be accompanied by a CO2-based regulatory framework for the new non-ZEV fleet, ensuring that emissions from these vehicles do not increase over time.

The ZEV mandate is a fundamental shift in how the UK regulates CO2 emissions from new cars and vans and will distinguish us from the European Union. In April 2022, a technical consultation entitled Policy design features of a new car and van ZEV mandate was launched, seeking views on how some of the provisions in a ZEV mandate could function, as well as asking how CO2 emissions from new non-ZEVs should be regulated. The technical consultation covered areas such as ZEV uptake trajectories for new cars and vans, how a certificate trading scheme might function, and the potential need for derogations and exemptions.

The technical consultation ran from 7 April to 10 June 2022. All the responses received to this consultation have been analysed and used to inform a third and final consultation on the design of a ZEV mandate, published alongside this written response.

Stakeholder engagement

During the technical consultation, Department for Transport (DfT) and Department for Business, Energy and Industrial Strategy (BEIS) officials conducted an extensive stakeholder engagement programme to understand better the views and opinions on the various design features. Engagement included:

• six stakeholder workshops for vehicle manufacturers, energy/charge point operators (CPOs) and environmental non-governmental organisations (NGOs)
• bilateral meetings with a variety of stakeholders, including vehicle manufacturers, capturing the views of over 90% and 97% of the new car and van market respectively
• participation in several external stakeholder-led meetings and roundtables

Who responded

The technical consultation received 76 responses in total, 3 from private individuals and the remainder from organisations including:

• vehicle manufacturers
• trade associations
• chargepoint/infrastructure operators
• energy providers and distributors
• pro-electric vehicle organisations
• companies operating large fleets of vehicles
• engine/drivetrain manufacturers
• non-profit/non-governmental organisations
• transport operators
• insurance companies
• delivery companies

Key announcements

Having considered the views submitted during this technical consultation process, the government remains committed to delivering a strong ZEV mandate and non-ZEV CO2 regulation that reflects the needs of the UK’s market and is ambitious but achievable.

The final proposals for the design of this regulation have been developed taking into consideration consumers, industry and the government’s overall climate ambition.

The key announcements can be found below, with the full detail being published in the accompanying consultation. the government looks forward to engaging with stakeholders on these final proposals.

Key announcements

For new cars, the uptake trajectory as set out in the technical consultation is confirmed. This is consistent with the level of ZEV uptake that was modelled in the Net Zero Strategy(NZS)/Transport Decarbonisation Plan (TDP).

For new vans, the final proposed uptake trajectory is higher than that proposed in the technical consultation and the NZS/TDP.

Banking of ZEV allowances will be allowed, subject to some limits and restrictions.

Borrowing of ZEV allowances will be allowed between 2024 to 2026, subject to caps on the amount that can be borrowed and with interest payable on the deficit.

To qualify as a ZEV, new cars and vans will need to meet certain minimum eligibility criteria. Manufacturers will have the possibility of earning additional credits for deploying ZEVs for use in specific applications, such as car clubs.

Derogations from the ZEV mandate requirements will apply for manufacturers selling less than 2,500 cars or vans per annum (small volume manufacturers, SVMs).

Each manufacturer’s specific, non-weighted average CO2 emissions from the year 2021 will be used as the baseline to regulate the non-ZEV portion of the fleet.

Exceeding the minimum requirements of the ZEV mandate can be used to offset non-compliance with the non-ZEV CO2 regulation.

During the years 2024 to 2026, any overachievement against the minimum requirements of the new non-ZEV CO2 emission targets can be used to offset non-compliance with the ZEV mandate, though this will be capped.

More detail on the above announcements, with an opportunity to feedback, can be found on the Consultation on a zero emission vehicle (ZEV) mandate and CO2 emissions regulation for new cars and vans in the UK, published alongside this document.

Part A: ZEV uptake trajectories – stakeholder views and government response

This section of the technical consultation focused on ZEV target trajectories from 2024 to 2035 for a vehicle manufacturer’s new car and/or van registrations in a given year. The section was split to consider uptake for new cars and vans separately, recognising these markets are at different stages of maturity. Stakeholders were asked for their views on the ZEV uptake trajectories set out and on targets being set annually.

Question 1a. What is your view on the potential trajectories the ZEV mandate for cars? 

Overall, responses to the proposed car trajectories and targets varied with several different considerations raised by stakeholders. Key themes from respondents are outlined below.

Views on the potential ZEV uptakes trajectories

Most respondents, representing a third of total respondents to the consultation, suggested that the car ZEV uptake trajectory should be more ambitious than the TDP/NZS trajectory proposed. A substantial portion of these respondents favoured following the Climate Change Committee’s (CCC) Balanced Net Zero Pathway trajectory. A smaller group of these respondents explicitly requested that the trajectory should be more ambitious in the early years 2024 to 2026. Reasons given included creating market certainty, ensuring an adequate supply of ZEVs and to avoid stifling supply. Several respondents wanted the ZEV mandate to push the uptake of ZEVs beyond a “business as usual” scenario. Those supporting more ambition included environmental NGOs, energy providers, CPOs, pro-EV organisations and vehicle manufacturers.

The next most supported view, shared amongst a large number of respondents, was broadly supportive of the TDP/NZS trajectory as set out. Only a smaller subgroup indicated their explicit support. Respondents generally welcomed the proposed trajectory as a positive step and/or that it was generally feasible. However, some suggested it was only realistic if it is accompanied by flexibilities. General support for the TDP/NZS car trajectory was shared by a variety of stakeholders, including various trade associations, vehicle manufacturers, environmental NGOs, fleet operators and CPOs.

A small number of respondents viewed the TDP/NZS trajectory as too aggressive and felt that it should be set at a lower level. Many of these respondents view 2024 as too soon to start annual targets for ZEV uptake, stating that product cycles and manufacturing plans cannot be changed at such short notice. Others suggested that several other factors would need to be considered in order for the TDP/NZS trajectory to be achievable, such as availability of charging infrastructure and the need for derogations for smaller volume manufacturers. This viewpoint was predominantly shared amongst vehicle manufacturers.

Wider ecosystem

Over a third of the total respondents to this consultation wanted a range of other factors to be considered alongside the ZEV uptake trajectories. These included ensuring the UK has an adequate supply of charging infrastructure and that other measures are used to stimulate further supply and demand, such as fiscal incentives.

Other themes included sourcing of batteries, macro trends (e.g. COVID-19 pandemic, the Russian Invasion of Ukraine and supply chain issues) and servicing requirements over the whole vehicle lifecycle (e.g. skills gap).

Flexibilities

Several respondents noted that flexibilities within the regulation were needed given the scale of ambition, including mechanisms like banking and borrowing, pooling and multi-year targets. Some respondents suggested they may be able to support the proposed trajectory and annual targets if adequate flexibilities are put in place. This is addressed in more detailed later in this document under Part C.

Environmental considerations

A large number of respondents highlighted that environment, climate change, and carbon budgets should be key considerations when setting the ZEV uptake trajectory. A small number noted that if a target is set below the TDP/NZS trajectory, other mitigations will be needed to meet legally binding carbon budgets. These considerations were shared predominantly across environmental NGOs, with some support shown from energy providers, vehicle manufacturers and CPOs.

Other

Other key considerations raised included the important role for fleets in achieving ZEV mandate targets. Some respondents also identified that different types of cars and vans should be considered differently within the ZEV mandate. Other respondents mentioned that the multi-stage vehicle market will need to be considered separately as it often relies on decisions made by the base manufacturer which it cannot control.

Question 1b. What is your view on annual targets for cars? 

A majority of respondents to this question, representing a quarter of total respondents, were in favour of annual targets. They suggested annual targets were needed for market certainty, to provide emissions reductions and to ensure supply chains and manufacturing can be scaled up appropriately. Some felt that long periods of time between increases in the stringency of CO2 targets, as happens under the existing new car and van CO2 emission regulation, will lead to some manufacturers holding on to better-rewarded vehicles in one year to ensure compliance with the following year’s targets. This viewpoint was supported by environmental NGOs, energy providers, vehicle manufacturers and transport operators.

A smaller number of respondents opposed the idea of annual targets or suggested they were not feasible. A few respondents explicitly requested targets be set across multiple years instead. The issue of vehicle manufacturers being locked into pre-existing product cycles which make it difficult to adjust/comply with the ZEV uptake targets was mentioned again, with the argument being that it would be particularly difficult to meet targets if they were set annually. Some of these respondents identified that annual targets would be unfeasible for small or niche volume manufacturers and that derogations would be needed to accommodate them within the regulation. It was also suggested that manufacturers should not be penalised for an inability to meet annual targets if these are caused by supply chain issues that are out of their control.

A large number of vehicle manufacturers stressed that annual targets would need flexibilities like banking and borrowing in order to be achievable, including both in-year flexibilities and flexibilities across several years. Around half of these responses suggested that annual targets are unfeasible without flexibilities.

Some respondents gave views on the potential to review targets. Some were open to reviews of annual targets. However, a small number suggested that reviews of targets would be difficult to achieve given the short time between 2024 to 2035.

Government response

There are highly contrasting views amongst different stakeholder groups on where the ZEV uptake trajectory should be set for cars. There was strong support for the government to strengthen the trajectory to a level that matches the CCC’s Balanced Net Zero Pathway, but there were also fewer, nonetheless important calls from parts of the automotive industry to introduce flexibilities and/or lower the ambition of the trajectory.

Considering the challenge that an even tougher trajectory may pose to certain vehicle manufacturers, particularly in the early years and given the short lead time, alongside the need to ensure the delivery of necessary carbon savings, the government proposes to maintain the ambition set out in the technical consultation but to introduce some flexibilities to make car and van trajectories achievable in the near term. Further detail on this is set out in the final consultation document Consultation on a zero emission vehicle (ZEV) mandate and CO2 emissions regulation for new cars and vans in the UK published alongside this document.

On the supply and availability of charging infrastructure, the government agrees that this is a key priority for a smooth transition to zero emission mobility. The government has already spent £2 billion to support the transition to zero emission vehicles. This funding has focused on reducing barriers to the adoption of such vehicles, including accelerating the rollout of charge-point infrastructure. In March 2022, the government published the Taking the charge: electric vehicle infrastructure charging strategy, setting out a plan to accelerate the rollout of charging infrastructure and ensure there are no barriers to ZEV adoption.

In line with the preference of many stakeholders, the setting of annual targets remains the proposed approach. This will guarantee ZEV supply for consumers, provide investment clarity, and give confidence to vehicle manufacturers and the wider eco-system. The government considers this to be an appropriate approach, alongside the introduction of flexibilities in the early years of the mandate.

Question 2a. What is your view on the potential trajectories the ZEV mandate for vans should follow and why?

A wide variety of views and considerations were received in relation to the proposed uptake trajectory for new zero emission vans. In general, most of those who responded to this question acknowledged that the zero emission van market lags behind that of cars and raised similar themes to those in question 1a. The key themes in relation to vans are outlined below.

Views on the potential ZEV uptakes trajectories

Two-thirds of respondents to this question suggested that the chosen trajectory should be more ambitious than the TDP/NZS uptake trajectory proposed. A smaller subgroup of these respondents wanted the trajectory to follow the CCC’s Balanced Net Zero Pathway. A recurring rationale was that a more ambitious ZEV uptake trajectory would provide certainty for business and would stimulate much-needed investment into the van market, ultimately increasing supply. Some of these respondents cited the total cost of ownership (TCO) benefits of owning a zero emission van, i.e. upfront and running costs combined make a ZEV van a more affordable choice when compared to a diesel, and that these benefits are already being seen or will be seen in the near future. These respondents explain that many fleets are already transitioning to ZEV or will do so soon for these reasons, therefore the level of uptake is expected to increase rapidly. Some respondents suggested that the demand for these vehicles is there now, but there is not enough supply. Some respondents also explained that due to the low number of hybrid vans currently available and the unlikelihood of many new hybrid models being developed due to the approaching end date for the sale of new petrol and diesel vans in 2030, they expect zero emission van sales to increase quickly with many consumers switching straight to ZEVs. This view was supported by vehicle manufacturers, environmental NGOs, trade associations, transport operators, energy providers, CPOs and pro-EV organisations.

A group of vehicle manufacturers and vehicle trade associations considered the van TDP/NZS trajectory to be relatively more ambitious than that of cars, given the comparative lack of maturity in the market. Most of these respondents requested flexibilities and/or market incentives if the TDP/NZS trajectory was introduced. This was due to pre-existing product plans already being in place and short lead-in times. Amongst these respondents, the majority did not say the targets would be “impossible” to reach, but would prefer a lower baseline target.

A small number of respondents from a variety of stakeholder groups, including vehicle manufacturers, CPOs and trade associations, supported the preferred TDP/NZS trajectory as set out in the technical consultation, though detailed explanation for this was generally limited.

Wider ecosystem

As with cars, a significant number of respondents to this question, from vehicle trade associations, vehicle manufacturers, CPOs, environmental NGOs and transport operators expressed the need for sufficient charging infrastructure for a successful ZEV van rollout. Many asked for infrastructure to be considered in parallel with the annual ZEV targets and that the right mix of depot, home and public charging was essential, though detail on what that mix might be was scarce.

In addition, others mentioned that the certainty of a ZEV mandate on vans, particularly an ambitious one, will benefit the wider ZEV eco-system by driving innovation, R&D, investment and manufacturing in this sector in the UK. As part of this, there were calls for support to be made available for research funding on viable ZEV technologies to meet the trajectories, as well as calls to address the skills gap in repairing these vehicles.

Specialist vehicles

Some stakeholders specifically requested derogations/exemptions for certain types of vehicles, including special purpose vehicles (SPVs) such as motorcaravans, where they viewed there to be no viable ZEV alternative. Similarly, a small number of respondents noted that zero emission vans cannot yet provide a replacement for some use cases, such as breakdown and recovery vehicles with a high towing capacity that a ZEV cannot currently fulfil.

Flexibility

A number of respondents composed mainly of vehicle manufacturers, wanted more flexibility to reach the ZEV targets. Specific flexibilities requested included the ability to bank, borrow and pool.

Question 2b. What is your view on annual targets for vans?

Overall, a large number of respondents supported annual targets, including manufacturers, energy providers and environmental NGOs, suggesting that a higher ambition will create investment opportunities within the UK. In general, these respondents called for more ambitious targets, with some suggesting targets should match those proposed by the CCC.

Only a small minority opposed the proposed targets altogether, calling for a single target to be set across multiple years. As with question 2a on car trajectories, there were calls for flexibilities within the regulation to enable manufacturers to meet annual targets.

Government response

It is widely recognised that the market for zero emission vans is in a different place to that of cars, being less mature and with limited product availability. This was reflected in the government’s initial proposals.

Throughout the response to the consultation, there was logical optimism from the majority of stakeholders on how the market will develop, given the positive economic case for ZEV vans as TCO benefits further develop and product availability increases. A more ambitious trajectory will stimulate much-needed supply to this market. In addition, due to the lack of hybrid vans available in 2022, vans are predicted to switch from diesel to ZEV at an accelerated rate.

It is for these reasons that the government has set out a proposal in the final consultation that is more ambitious than the TDP/NZS ZEV trajectory for vans, although the trajectory remains lower than the trajectory for cars. As with cars, flexibilities such as banking and borrowing will also be introduced for the ZEV Mandate in the early years to assist vehicle manufacturers. In addition, it is possible that some vehicles may technically struggle to be fully zero emission whilst retaining their function today, such as motorcaravans and other SPVs. Therefore, we propose that SPVs will initially be exempt from the ZEV mandate, but that adding ZEV variants of SPVs to the market be rewarded accordingly.

As some smaller volume van manufacturers may face challenges producing zero emission vans with the short lead-in time, the government also proposes to include derogations for small volume manufacturers. More information on derogations and exemptions from the ZEV mandate can be found below.

On the supply and availability of charging infrastructure, the government agrees that this is a key priority for a smooth transition to zero emission mobility. The government has already spent £2 billion to support the transition to zero emission vehicles. This funding has focused on reducing barriers to the adoption of such vehicles, including accelerating the rollout of charge-point infrastructure. In March 2022, the government published the Taking charge: electric vehicle infrastructure charging strategy, setting out a plan to accelerate the rollout of charging infrastructure and ensure there are no barriers to ZEV adoption.

Part B: ZEV certificate allocation – stakeholder views and government response

This part of the consultation asked questions on how the ZEV certificate system should function. Using powers under the Climate Change Act 2008 means the ZEV mandate must operate as a trading system.

The ZEV mandate will be implemented as a trading scheme under the Climate Change Act 2008. Trading schemes created under the Climate Change Act may take 2 forms:

• a trading scheme under Part 1 operates by “limiting or encouraging the limitation of activities that consist of the emission of greenhouse gas or that cause or contribute, directly or indirectly, to such emissions”,^{[footnote 1]} and uses allowances and credits; or

• a Part 2 trading scheme uses certificates and operates by “encouraging activities that consist of, or that cause or contribute, directly or indirectly, to reductions in greenhouse gas emissions or the removal of greenhouse gas from the atmosphere”^{[footnote 2]}

While the technical consultation asked about certificate allocation, presuming a Part 2 scheme, the final ZEV mandate proposal contained within the consultation published alongside this response will use allowances and credits to achieve the same objectives through a Part 1 scheme. To accurately summarise the consultation responses received to questions in consultation, we will continue to use “certificate” where appropriate. However, in the government response section to familiarise stakeholders with the terminology used in the final ZEV mandate and non-ZEV CO2 regulation proposals, we will use “credit” and “allowance”.

Under a Part 1 scheme, as outlined above, 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 (see Part C for more information) or by offsetting with credits.

If manufacturers have any surplus allowances due to overcompliance with their ZEV targets, they are able to trade these allowances. This section focused on minimum eligibility criteria of a vehicle to qualify as a ZEV; whether certain characteristics of a ZEV should be encouraged by rewarding more credits and if the system should remain flexible over time.

Question 3a. What is your view on how the certificate system should operate and on our initial long list of potential vehicle attributes that could be rewarded or incentivised?

Around half of all respondents expressed their preference for a simple certificate system. Several suggested that one ZEV should be worth one certificate and/or the only minimum eligibility criteria should be the 0g CO2/km exhaust measure. It was reasoned that this simplicity would make it administratively and operationally easier to run as well as minimising the risk of unintended consequences. A group of these respondents explicitly suggested that the longlist of eligibility criteria put forward in the technical consultation should be considered in separate legislation. However, some did not necessarily oppose the inclusion of additional measures from the incentive longlists. The preference for simplicity had support from an array of stakeholder groups including manufacturers, CPOs, pro-EV organisations, energy providers and environmental NGOs.

On how the certificate system should operate, a small number of respondents suggested that reporting should be made publicly available and should be frequent. Others also explicitly stated that partial certificates should not be given to plug-in hybrids (PHEVs) and full hybrids (HEVs).

A number of concerns were raised on specifying any eligibility/incentivisation criteria:

The potential for market distortion

It was suggested that requiring or encouraging ZEVs to have certain features would skew the market to produce only those types of vehicles. This may restrict market development in other areas, whilst adding additional burden on manufacturers. Many argued that the market should determine what types of ZEVs are sold. In particular, a number of respondents raised concerns with using range as a criteria/incentive. Not all raising concerns were opposed to using range but noted that it would need to be considered to prevent distorting the market.

Gaming

A concern amongst respondents was the risk of companies manipulating the certificate system for individual gains. A small number of respondents suggested that this could be stopped with preventative measures, such as financial penalties.

Question 3b. Please provide detail on options you specifically support or oppose?

The below summarises views, where given, on each attribute proposed in the minimum eligibility longlist. It is worth noting as the below only captures where people were specifically for and/or against the criterion, the total number of respondents for each one can be relatively low. The below lists each attribute in order of most preferred to least:

0g CO2/km

Of the 6 eligibility criteria suggested, the most popular metric listed was 0g CO2/km. Many explained that since only ZEVs should be eligible for certificates, a 0g CO2/km metric was necessary to ensure compliance. This was the most widely supported measure by a mix of stakeholders from vehicle manufacturers, pro-EV organisations and environmental/transport NGOs.

Following this metric, explicit support for the remainder of the criteria is no more than half of total respondents.

Battery/drivetrain warranty

This specification was the second most popular minimum eligibility criteria, with few respondents explicitly opposing its inclusion. Reasons for its inclusion were to boost consumer confidence, protect consumers, and boost the secondhand zero emission car and van markets. No stakeholders suggested a length of time for how long a battery/drivetrain warranty should last. Respondents that supported this measure included a range of stakeholders comprising energy trade associations, transport operators, insurance companies and an engineering firm.

Battery pack/vehicle recycling

An equal number of respondents supported this metric and electric range. However, this represents only a small group of total respondents. Supporters argued that the inclusion of this specification will ensure wider sustainability issues with using raw materials to make batteries/vehicle materials are mitigated against in the transition to ZEVs. Some did caution that the government would need to make this requirement realistic due to the short lead-in time.

Minimum electric range

Some suggested that the inclusion of this metric would incentivise larger vehicles and may reduce the availability of lower-range vehicles, which might be more suitable for urban living. Amongst those who supported using range, the majority caveated this viewpoint with concerns and precautions to avoid distorting the market. These preferences were not particular to one group of respondents.

Charging cables

A small group of stakeholders, including an energy provider and an insurance company, supported the inclusion of certain charging cables as a minimum. Although reasons for supporting this metric were generally limited, some explained that it would help boost consumer confidence and give certainty to charging infrastructure providers.

Battery efficiency

This metric had the least amount of support, with some of these respondents cautioning that any requirements may be soon outdated. In addition, others noted that if implemented, it must not disincentivise heavier, longer-range vehicles.

Incentivisation list (Question 3b)

In general, limited support was shown for many of the metrics listed in the incentivisation criteria, most likely due to most respondents’ general preference for simplicity. The low volume of responses meant answers were more nuanced or caveated with other factors inhibiting the identification out of common themes. The below covers each attribute in order of most preferred to least, grouping where an equal number of supporters were found.

The 2 incentivisation criteria most supported were:

• vehicles with a higher range
• ensuring the sustainability of supply chain

Although these were the most supported criteria, respondents with this view still represented a relatively small group of total respondents.

Starting with vehicles with a higher range, stakeholders felt that this should be incentivised as this would ultimately remove the need for petrol or diesel vehicles, which have a perceived higher range. Some cautioned that if this metric is incorporated, it needs to be implemented in such a way as to avoid market distortion. Support was shared evenly from an array of stakeholders including CPOs, manufacturers, transport operators and a motoring association.

Regarding the awarding of more certificates to manufacturers with a sustainable supply chain, some stakeholders felt this would encourage manufacturers to invest in more sustainable methods of product sourcing, manufacture and end-of-life recycling. This would help end the current unethical mining of raw materials, often from conflict zones, and the use ecologically damaging methods for extraction. This was supported by a mix of vehicle manufacturers, transport operators, energy companies and environmental NGOs. A smaller number of stakeholders opposed this idea, suggesting it is hard to define the exact definition of “sustainable” and that it may complicate the administration of the ZEV mandate, putting further burden on manufacturers.

Other incentivisation criteria under consideration were:

• vehicles with certain use cases e.g. higher mileage vehicles
• battery efficiency

Starting with the former, vehicles that would typically be included in this category include, but are not limited to rental vehicles, mobility as a service (MaaS), car clubs, and taxis. Respondents rationalised that incentivising the sale of ZEVs to these services/companies would save more overall carbon as they are typically driven further and/or directly negate the need for individuals to own a vehicle, which would reduce overall congestion. Some cautioned that incentivising these vehicles would require that the government ensures the vehicles are used as intended throughout effective enforcement. This view was supported by a mix of stakeholders including a motoring association, an energy provider, a transport/energy NGO and pro-EV organisations.

Battery/vehicle efficiency incentivisation had some support with respondents providing suggestions on how best this might be done including via vehicle class to prevent vehicles with certain uses being penalised and using data already contained within the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) test cycle. Another suggested combining efficiency with range to promote the most efficient vehicles while leaving space for heavier, longer-range vehicles.

• bi-directional charging
• range as a function of weight
• specialist vehicles

All 3 of the above criteria received an equal amount of support, albeit with only a small group of total respondents represented. A small amount of opposition was also received.

Bi-directional charging had support mainly from those in energy sector. Justification for incentivising this feature was down to the benefits it could bring to the UK’s energy system, particularly as demand for electricity intensifies. Some specifically commented that this should not be implemented immediately but in the future as the technology matures.

Specialist vehicle incentivisation had support from an array of stakeholders including a transport charity, motoring and energy associations and a manufacturer. Overall, the consensus was that zero emission specialist vehicles, such as wheelchair accessible vehicles (WAVs), should be incentivised to ensure the transition to ZEV is inclusive. If not incentivised, due to potential technological and economic barriers in making viable ZEV versions, it may result in ZEVs not being available for these users.

Range as a function of weight had support from a range of stakeholders including an environmental NGO, motoring association and transport operator. It was reasoned smaller, higher-range vehicles are more sustainable and should be encouraged. However, it was noted by a few respondents that, if incentivising this behaviour, banding or classification of vehicles would be needed to recognise different segments of the market.

• vehicle weight (e.g. lower mass vehicles)
• vehicle price point; vehicle footprint
• certificates for lower pollutant tyres/breaks

Overall, these vehicle attributes proved to be divisive with an approximately equal number of people directly supporting and opposing their inclusion. The views below represent a small portion of total respondents.

Vehicle weight incentivisation had some support from manufacturers, transport operators and motoring associations. Where reason was given, support for this measure included: rewarding those who have invested in the expensive light-weighting of vehicles and reducing overall tyre wear and other non-exhaust emissions. However, some caveated this by stating heavier “family” cars should not be unfairly penalised. In opposition, others noted that a larger vehicle with more passengers is better environmentally than separate cars and this measure could skew the market.

Vehicle price point had slightly more opposition than support. Some rationalised that incentivising lower price points would adversely impact consumer offerings and exclude manufacturers unable to offer a lower cost product e.g. small volume manufacturers with limited resources. For those who supported its inclusion, it was suggested that it was needed to keep mobility affordable, with one respondent suggesting that this should actually be achieved via subsidies based on household income as opposed to retail price.

Vehicle footprint received more opposition than support, with those in favour expressing their support for the incentivisation smaller vehicles. In contrast, more stakeholders, mainly from the energy sector, argued that this measure would skew the market to smaller cars and unfairly penalise larger cars that are best suited for families.

Certificates for lower pollutant tyres/brakes proved contentious. Supporters explained that this would further reduce air pollution, improving the environment and public health. However, amongst this category some said that this should be implemented in later years. Others cautioned that as manufacturers cannot control what happens to tyres/brakes after the point of sale, this should not be included. Similarly, it was argued that these types of tyres/brakes may not be suited to the vehicle’s purpose and should be dealt with other legislative mechanisms.

• range as a function of battery/drivetrain weight
• battery/drivetrain warranty

Both criteria had the least amount of support with more opposing their inclusion. General explanation for these viewpoints was absent.

Those opposing battery/drive train warranty incentivisation generally felt it should be down to market forces, as manufacturers already compete with one another. Others noted it would be too complicated to enforce and it may be best suited to minimum eligibility.

With regard to range as a function of battery/drivetrain weight, few respondents provided an opinion on this specification with more opposing its inclusion. One brief suggestion for its exclusion was that it could skew the market towards smaller vehicles.

Question 3c. Are there additional options not listed we should consider?

Most respondents did not explicitly answer question 3c with only around a quarter of total respondents to this consultation suggesting a new eligibility/incentivisation criterion.

The most common measure suggested was to reward transitional technologies, like PHEVs and HEVs with partial certificates, with many citing the ZEV uptake regulations in California and China as precedents for the inclusion of similar measures. Although this was the most common, this idea was nonetheless put forward by only a small number of respondents.

Other measures with individual support included:

• to offer a reward and/or incentive for vehicles developed in the UK
• introducing measures that encourages easy and accessible charging
• enhancing safety features
• lower speed limits
• encourage the reuse, recycling and remanufacture of materials
• a levy on non-ZEVs for using roads
• rewards/incentives for retrofitting non-ZEVs
• partial certificates for liquid fuels that have lower overall CO2

Some took the opportunity to suggest that the government should make all reporting quarterly and transparent as well as to reduce any penalties during the early years.

Question 3d. What are your views on how flexible the ZEV certificate system should be over time?

In terms of how flexible the certificate system should be over time, the preference was for it to be periodically reviewed and remain adaptable. Many respondents suggested the government should monitor markets and make the changes necessary to ensure minimum eligibility/incentives remain up to date with technological/market developments. Exactly how this review period could work and at what timescale varied, with suggestions ranging from biannually to every 3 years. Many respondents noted that changes to the certificate system should be made with sufficient notice, so that manufacturers have enough time to react. This viewpoint was generally supported by environmental NGOs, pro-EV organisations, delivery services and some manufacturers.

Conversely, a large group of manufacturers also argued that the certificate system should remain static to provide stability and certainty. Many reasoned that stability is needed to enable effective planning to ensure any current and future investments are not put at risk.

Government response

The vast majority of stakeholders, representing a range of sectors and organisations, wanted the allocation of certificates to be simple.

Many did not support the inclusion of any of the attributes set out in either the minimum eligibility or incentivisation longlists. The criteria receiving the largest support was the inclusion of 0g CO2/km metric under the minimum eligibility specification. Aside from this, general views on each longlist were mixed, making it difficult to summarise. In response to question 3c, no metrics were put forward by any stakeholders in large numbers.

When the eligibility and incentivisation criteria were first proposed the intention was not to adopt all of the criteria set out, but to understand stakeholder perspectives. The government agrees with the principle of simplicity and to not unduly add complexity where not beneficial. However, the ZEV mandate certificate system is a powerful tool in shaping what ZEVs are available now and in the future, therefore this simplicity must be balanced with the need to, inter alia:

• protect consumers
• instill consumer confidence
• maximise the reduction of carbon emissions
• make zero emission mobility accessible to all

With this in mind and using precedent from ZEV mandate schemes across the world, we are proposing the below attributes for minimum eligibility and incentivisation.

For minimum eligibility criteria a vehicle must meet the following to qualify as a ZEV and, therefore, not use an allowance:

• 0g CO2/km from the tailpipe, in addition to other targeted emissions under the Climate Change Act of 2008
• 120 mile WLTP minimum range
• 8 year/100,000 mile battery/drive train warranty (whichever comes first), with a commitment to replace the battery if it drops below 70% capacity within that window
• a minimum of 3 year vehicle warranty

Over 95% of the ZEVs sold in the UK in 2021 met the minimum range threshold being proposed, and the vast majority of ZEVs sold in the UK already have warranties meeting, or exceeding, the minimum levels being proposed. The government, therefore, believes that this represents a fair minimum specification that balances simplicity and a low administrative burden vs ensuring a more reliable ZEV owner experience across models.

For incentivisation criteria, as set out in the accompanying consultation, we propose 2 situations where vehicles may qualify for additional credits. These are:

• selling ZEVs to car clubs
• selling zero emission wheelchair accessible vehicles (WAVs)

The inclusion of these criteria will advance the government’s objectives as outlined above, whilst minimising complexity. Some may need additional monitoring to ensure compliance.

On question 3d, reviewing the flexibility of the system, the government agrees with the predominant stakeholder preference of keeping the system adaptable. The automotive landscape is rapidly changing with new developments and technologies becoming readily available. Regulations must keep pace with any changes to market conditions to remain fit for purpose. Therefore, we propose to keep the trading system under review at all times and will inform stakeholders in advance of any changes. For example, bi-directional charging may be required as part of the definition of a qualifying ZEV in future years if there is a market failure identified in this area.

Part C: Banking, borrowing and transfer of ZEV certificates

The section explored different flexibilities that could be deployed under the ZEV mandate to support manufacturers in complying with the ZEV mandate. A particular focus was on whether manufacturers should be able to:

• bank surplus certificates for use in future years
• borrow certificates from future years if unable to meet ZEV targets
• form a pool with other manufacturers to achieve compliance

Question 4a. What are your views on our initial preferences for the certificate scheme to not allow any form of banking, borrowing or pooling? Please explain your reasoning.

Respondents were divided on whether manufacturers should have the ability to bank and borrow certificates and/or to form pools. Most respondents generally viewed banking, borrowing, and pooling as one, therefore these are considered together below.

Around a third of total respondents to this consultation were against the inclusion of all 3 flexibilities. Those with this viewpoint included environmental NGOs, pro-EV organisations, energy providers/associations, some manufacturers and transport operators. Reasons for their exclusion included:

Undermining the effectiveness of the ZEV mandate

These flexibilities could delay ZEV rollout by giving manufacturers the chance to delay meeting their ZEV obligations by relying on certificates from other manufacturers or borrowing from future years.

Reducing environmental integrity

The risk that some emissions reductions may be lost if not all manufacturers meet targets in the early years and instead borrow from their future production, recognising that the earlier a ZEV is put on the road, the more emissions it avoids.

Uncertainty of supply

Allowing manufacturers to ignore their obligations and find other ways to comply with ZEV targets may reduce the actual number of ZEVs supplied in a year. This uncertainty can have knock effects on the wider ZEV eco-system, e.g. charging infrastructure rollout.

Risk gaming and monopolisation of certificates

Some manufacturers may choose to withhold certificates in certain years and others may back-load ZEV sales until later years.

Simplicity

Others noted that it would be administratively easier to regulate the scheme without the extra complexity of these flexibilities.

Discrimination against small volume manufacturers

Some of these respondents also raised concerns around this potentially being discriminatory towards certain manufacturers, such as smaller volume manufacturers, who have limited resources to buy certificates.

Pooling

Most agreed this is not needed provided free trading was allowed. However, some specifically mentioned pooling between connected entities will be needed to avoid unnecessary administrative burden.

A larger number of stakeholders, consisting primarily of manufacturers and vehicle trade associations, supported the inclusion of all 3 flexibilities.

Some vehicle manufacturers explained that it would be too difficult to meet the ZEV targets as set out, therefore these flexibilities are necessary. In particular, many stated they wanted to comply with the ZEV targets, but are unable to due to long product development times ranging from 5 to 10 years and the relatively short time for the regulation to take effect.

Several respondents suggested that these flexibilities should only be available for a limited amount of time, allowing relief in the early years until manufacturers have ZEVs available. Others also noted that these flexibilities will help protect against unpredictable external factors like wars and other global disasters, as highlighted in recent years with the Russian invasion of Ukraine, semi-conductor shortage and COVID-19. It was also suggested the ability to bank would act as an incentive for manufacturers to sell more ZEVs, further supporting inclusion of this provision.

Question 4b. Should trading only take place in the same period in which the certificate is earnt or should it be more flexible than this?

The majority of stakeholders felt that trading should be limited to the same time period in which it was earnt. Reasons for this viewpoint included:

• certainty of supply – some respondents expressed concerns with manufacturers holding on to certificates for use in future years as it may risk certificate availability for trading in a given year

• avoids uncertainty in infrastructure delivery – linked to the point above, if the supply of ZEVs is uncertain, this then may obstruct the smooth rolling out charging infrastructure

• administratively easier – many noted it would be easier for manufacturers to track their compliance and would enable a simpler, more transparent reporting process of which manufacturers are compliant

• avoid delays in ZEV rollout – many reasoned that if manufacturers have to sell their certificates within a given period, then it is guaranteed that they would then have to produce more ZEVs to comply with their next target, hence avoiding any delays.

Respondents sharing these views come from an assortment of backgrounds including manufacturers, environmental NGOs, pro-EV organisations, energy and trade associations.

Another small group of respondents, comprised solely of manufacturers, suggested that the certificates should be able to be traded across years, with proposals ranging from 1 to 3 years. These respondents rationalised that this time period would give manufacturers short-term flexibility to manage compliance, whilst allowing the government to meet its carbon budgets.

Question 4c. Should or shouldn’t there be a minimum price set for selling certificates and/or a cap on the number of certificates that can be earnt in a year by a vehicle manufacturer?

A significant number of respondents opposed the notion of a setting minimum certificate price and/or whether there should be a cap on total amount of certificates that could be earnt. Across this group of stakeholders, it was almost unanimously agreed that it should be left to market forces to decide the price and number of certificates sold. Many reasoned that manufacturers should be able to buy and sell as many certificates as needed to meet supply and demand and that government intervention may lead to unintended consequences. Others pointed out that the penalty price will act as a de facto price cap. Support for this viewpoint came mainly from manufacturers, as well as some energy providers, trade associations and pro-EV organisations.

A relatively small number of respondents including an environmental NGO and a transport operator, supported setting a minimum price and/or cap. Some respondents felt that a minimum price would provide stability, protect against future price shocks and any other commercial pressures. A cap was also suggested to ensure efforts were made by every manufacturer to decarbonise instead of relying on buying certificates.

Government response

We want a system that transitions all manufacturers to zero emission mobility in an economical and sustainable manner. Given the challenges some manufacturers will face in meeting ZEV uptake targets, particularly in the short term, the government proposes to introduce borrowing for a 3-year period. Borrowing will be allowed between 2024 to 2026 with all debts being repaid by 2027. There will be a cap on the percentage of allowance that a manufacturer compared to their ZEV target each year to ensure a minimum number of ZEVs are supplied. In 2024, manufacturers can borrow 75% (16.5% of total car sales) of their ZEV sales, reducing to 50% (14% of car sales) and 25% (8.25% of car sales) in 2025 and 2026 respectively. The equivalent values for the van targets are 7.5%, 9% and 5.5% in 2024, 2025 and 2026 respectively. To mitigate against any lost carbon, a 3.5% levy on any allowance deficit will also be charged annually, requiring the delivery of more ZEVs in the future to compensate any underperformance.

In contrast, banking does not pose a risk of lost carbon, as it enables manufacturers to bring forward ZEV sales without jeopardising meeting targets in future years. For that reason, we propose to allow banking throughout the scope of the regulation. However, to ensure that there is sufficient supply of allowances for trading, banked allowances will expire after 3 years. For example, an allowance allocated but not used in 2024 may be banked for use in 2025, 2026 or 2027 but would then expire if not used in 2027.

On pooling, the government recognises it will be administratively easier for manufacturers/connected entities to be able to form a “closed” pool for purposes under the regulation. As with existing regulations, it will also make it easier for the enforcement body to calculate ZEV performance and targets per vehicle brand. Therefore, we propose that connected entities will be allowed to pool. This is further explained in question 5a. For other vehicle manufacturers trading will be a sufficient mechanism, without the need to pool, so open pooling will not be allowed.

To avoid any unintended consequences caused by interfering with market forces, no minimum price or cap on allowances is proposed for the selling of ZEV allowances.

Part D: Operation of the ZEV mandate

This section explored how the ZEV mandate will operate and to whom it should apply. More specifically this section looked at the legal entities that will be obligated by the ZEV mandate, and how these entities should be treated given the potential that said entities will be split as a result of vehicle type approval being included within the Northern Ireland Protocol. Questions were posed on how these separate legal entities could be “re-joined” for the purposes of the ZEV mandate, as well as on whether there should be any derogations and exemptions to the ZEV mandate and the enforcement of penalties.

Question 5a. Do you have any concerns with the proposal to ‘link’ the 2 legal entities of one manufacturer responsible for new car and van registrations in the UK, purely for the purposes of the ZEV Mandate and accompanying CO2 regulation?

The majority of respondents, representing around a quarter of total respondents to this consultation, had no concerns with the proposals although explanation was limited. Some said it seemed administratively logical and like a sensible tool to ensure each vehicle brand is set only one ZEV/CO2 emission target. Support for the proposals came from a broad range of stakeholders including energy providers, manufacturers, CPOs and environmental NGOs.

It was clear that a large group of stakeholders generally misunderstood the proposal with many thinking that the question related to:

• the linking of the car and van ZEV mandates, where overcompliance with one could offset compliance with the other
• the enabling of companies to offset compliance with ZEV mandate targets from their various brands

Some noted that the government must ensure there are no issues regarding the Northern Ireland Protocol, and that the relationship between any entities being linked must be clear and that established relationships between companies should not change over time.

Government response

The existing car and van CO2 emission standards regulations apply UK-wide and, per the terms of the Northern Ireland Protocol, the type-approval regulations apply GB wide. Therefore, vehicles in Northern Ireland will continue to have EC type-approval or UK Northern Ireland (UKNI) type-approval. Under the retained EU regulations, manufacturers will have established legal entities which are responsible for the EC type-approval of their vehicles. As the UK moves to a full GB type-approval scheme, a vehicle manufacturer may choose to set up a new legal entity in GB which would be responsible for the GB type-approval of these vehicles. If this occurs, there could be multiple type-approval holders responsible for vehicles placed in the UK market; one entity for EC type-approval and one for GB type-approval. Conversely, manufacturers may choose to have the same legal entity be responsible for both the EC and GB type-approval of their vehicles.

Even now, under the retained car and van CO2 emission standards regulations, it is currently possible for one vehicle brand to have multiple type-approval holders. This is because different approval holders within the same “brand” may be responsible for the EC type-approval of different vehicle models (currently only EC type-approval is recognised under the regulations as GB type-approval is not available at the time of writing). These different type-approval holders/legal entities typically choose to form a closed pool to enable the government to set one CO2 emission target per vehicle brand. To mitigate against any potential consequence of multiple legal entities representing one vehicle brand, particularly in light of the operation of the GB type-approval scheme, it is government’s intention to continue the use of the closed pooling system for both the existing and future regulations. This will allow multiple connected legal entities to be treated as one manufacturer, to ensure that one ZEV mandate/CO2 emission target is calculated per vehicle brand.

Question 5b. Please provide specific detail on the specific vehicle types you believe should be exempt from ZEV mandate requirements, for both cars and vans, with clear reasoning?

The majority of respondents agreed that there should be exemptions to ZEV mandate requirements, with most supporting exemptions for specific vehicle types and some preferring them to be applied to manufacturers. Just under a third of all respondents, including some manufacturers, energy producers, and transport operators, made no comment on the question.

Special purpose vehicles (SPVs)

Various respondents, including vehicle trade associations, environmental NGOs, motoring associations, and manufacturers, advocated for emergency vehicles to be exempt. There was a breadth of opinion about the scope of such exemptions, most respondents favoured an indefinite exemption for ambulances and/or fire engines, however, some said these should be time-limited and only if operating in rural areas. With respect to police vehicles, there was some, albeit less, support for these to be exempt and for a time-limited period.

There were also other types of SPVs that were recommended for ZEV mandate exemption, with some vehicle manufacturers and trade associations calling for military and armoured vehicles to be exempt. Other manufacturers endorsed exemptions for motorhomes, hearses and wheelchair accessible vehicles (WAVs). It was suggested by a small number of respondents that rescue vehicles and roadside assistance vans should be exempt from ZEV mandate requirements. Some trade associations and insurance companies commented that specialist vehicles with no practical ZEV alternative should be exempt but offered no detail on specific vehicles that were being referred to.

Multi-stage and limited type-approval routes

Respondents including some environmental NGOs and manufacturers advocated for multi-stage incomplete vehicles to be exempt. Other vehicle manufacturers also proposed exemptions for vehicles approved under Individual Vehicle Approval (IVA) and National Small Series (NSS) Type Approval.

Small volume manufacturers

There were calls for exemptions to apply to SVMs as well as some other organisations. Suggestions on potential exemptions included being exempt from ZEV mandate requirements for 3 to 5 years after regulation is introduced. Some larger manufacturers and a research group also advocated exemptions for SVMs for a limited, although unspecified, period of time.

A small number of respondents suggested that exemptions from ZEV mandate requirements should apply to very small volume manufacturers, specifically those registering fewer than 1,000 units per year. Others commented that such exemptions should be in place until 2030 to allow these very small manufacturers with time to develop ZEV products.

Retained EU new car and van CO2 emission regulations

Multiple vehicle manufacturers voiced their support for keeping the exemptions the same as those in the existing new can and van CO2 emission standards. Currently, all SPVs and those following the limited type-approval routes (IVA and NSS) are exempt. Manufacturers producing more than 1,000 cars or vans per annum are currently also exempt from the regulations.

Opposition to exemptions

In opposition, there were some organisations that felt certain vehicles should not be exempt. A number of trade bodies argued that specialised public sector vehicles should not be exempt as they would only require minor adaptations to decarbonise, whilst others were against certain types of military vehicles, such as staff cars, being exempt.

Some CPOs advocated for exemptions to be limited to ensure positive environmental outcomes, whilst others, including transport operators, trade bodies and manufacturers suggested they be considered on a case-by-case basis.

Other respondents, including a small number of vehicle manufacturers, felt that there should be no exemptions to ZEV mandate requirements at all, but did not offer explanations. Several environmental NGOs also commented that exemptions should not apply to any vehicle types as a trading scheme would be sufficient in allowing manufacturers to comply with the regulation when they would not otherwise be able to do so.

Monitoring and enforcement of exemptions

Observations were made regarding how ZEV mandate exemptions should be monitored and regulated, and what they should cover in scope. It was suggested that they be time-bound and reviewed continually to account for technological development, as certain vehicle types that may require exemptions today will not necessarily need them in several years’ time. A small number of manufacturers and vehicle trade associations supported a 2030 review.

Government response

There is general support and an understanding of the need for exemptions to the ZEV mandate, but opinion on how, and to whom, the exemptions should apply to is varied. A number of possible suggestions were put forward for exemptions, including specific vehicle types, whole categories of vehicles, and exemptions based on the number of vehicles a manufacturer sells.

As outlined above, SPVs are currently exempt from the existing CO2 regulation standards. This includes the following vehicles: ambulances, hearses, motorcaravans, WAVs, armoured vehicles and “special group” (a group for vehicles that could be considered as having a special purpose, but that do not fall into any of the other special purpose categories).

For many SPVs, whilst there are currently some ZEV versions available, the number of variants is low largely due to economic and technological barriers to creating significant numbers of viable ZEV variants of these vehicles. Due to their typically multi-stage build process, SPV converters rely on manufacturers to supply base vehicles giving them limited utility when selecting powertrains as that decision is typically made by the base vehicle manufacturer. The government wants to ensure that all vehicles transition to fully zero emission. The government, therefore, proposes that all SPVs are exempt from annual targets, but for a time-limited period, and that any ZEV SPVs be rewarded with a credit in the ZEV mandate. We believe that this approach should support the development of new ZEV options and incentivise the supply of ZEV base vehicles to converters. To ensure that all people in society can participate in the transition to zero emission mobility, it is proposed that ZEV WAVs specifically be incentivised with an additional 0.5 credit, making it 1.5 credits in total. SPVs will continue to be exempt from the non-ZEV CO2 regulation.

On limited type-approval routes, such as GB small series (GB SS), NSS, and IVA, there is no legitimate reason to exclude these vehicles from the ZEV mandate. To close the risks of manufacturers putting vehicles through NSS, GB SS, or IVA to avoid compliance with either the ZEV mandate or non-ZEV CO2 regulation, the government proposes that these type-approval routes will now be in scope. The government recognises that there may be challenges, in particular with the inclusion of IVA vehicles, as many importers use this type-approval route so we would encourage manufacturers to engage with the consultation on the full proposal should they have concerns.

With respect to multi-stage vehicles, the government also proposes that these vehicles be in scope. Under the existing regulations, the base vehicle manufacturer is generally responsible for the CO2 emissions of that vehicle. As it is unlikely that the powertrain will change from the base vehicle to the completed vehicle, it is proposed that this process continues. It is important to note that regardless of the exemptions or derogations set out in this chapter, all new cars and vans will still be required to meet the 2030 and 2035 milestones. These exemptions will be kept under review.

Question 5c. Please provide specific detail on what derogations you think should apply to the ZEV mandate for cars and vans with clear reasoning? Include detail on what that derogation would entail – both the pre-determined criteria that would trigger eligibility and what the derogated target should look like.

Just under half of all respondents supported the concept of derogations from the ZEV mandate for new cars and vans. There was an equal split between those who thought that derogations should apply to vehicle types and those who believed they should be applied to manufacturers. Several comments were made relating to how derogations should be regulated, their scope and how they should be monitored.

Special purpose vehicles (SPVs)

A number of different vehicle types were put forward as being potentially eligible for derogations. Some respondents, including a number of manufacturers and CPOs, supported derogations for SPVs such as emergency vehicles and military vehicles, with some arguing they should be time limited to 2 years following the introduction of the mandate. Others were more vague and advocated derogations for vehicles that cannot yet be decarbonised using existing technology. A small number of manufacturers remarked that car-derived vans should be exempt if they are classified as M1 when registered. Further comments were made by some about the need for vehicle-level derogations but without explanation.

Small volume manufacturers (SVMs)/Volume-Based Derogation

Respondents, mainly from the automotive sector, felt that derogations should be limited to SVMs, with the threshold to qualify for a derogation ranging from 1,000 to 3,000 vehicles per annum. It was proposed by some vehicle manufacturers that a derogation should be introduced for PHEVs produced by SVMs and that they should be included at a reduced certificate value of 0.5 per PHEV for up to 3 years after the ZEV mandate comes into force. Other manufacturers wished to see a derogation allowing micro-manufacturers to be excluded from battery efficiency and recycling requirements, and a derogation for niche and SVMs if the “banking” or “borrowing” of ZEV certificates is not implemented.

Comparisons were made with the California ZEV mandate, which has derogations in place for SVMs that produce fewer than 4,500 vehicles a year.

Bespoke derogations

Other vehicle manufacturers stated that derogations should only be applied to manufacturers that cannot achieve mandated targets even when considering trading ZEV certificates. This could include reducing the 2024 target by 50% or the 2025 target by 40%, for example. It was also requested that there should be a derogation to allow manufacturers who fail to meet ZEV mandate requirements to offset their performance by reducing their CO2 emissions output in their non-ZEV fleet production. Other respondents supported a derogation due to the time taken for certain manufacturers to develop ZEV products, whilst views were put forward that it may be wiser to issue a derogation that focuses on CO2 emissions reduction targets rather than a ZEV mandate. Some suggested that such bespoke derogations could be based on a manufacturer’s improvement from their historical performance.

EU CO2 emission regulations

A large number of vehicle manufacturers emphasised that derogations should maintain the same thresholds that are specified in the current CO2 emission standards regulations. These thresholds are currently bespoke to individual manufacturers to ensure those who had previously received a derogation under the EU regime were eligible for one under the UK scheme. For cars, the default thresholds for a small and niche volume derogation are 1,700 and 50,000 respectively. For vans, the default small volume derogation threshold is 4,300.

Opposition to derogations

As with exemptions, there were calls to ensure that derogations are limited in scope. Respondents covering CPOs, vehicle/energy trade associations, vehicle manufacturers, and energy producers and suppliers, commented that derogations should only apply in limited circumstances. It was thought that derogations should be minimised and time-bound because in many cases they are difficult to justify fully given the proposed provisions set out in the technical consultation and the impact of derogations on reducing emissions.

It was mentioned that derogations should have a clearly defined assessment and review timetable, while others, including manufacturers, emphasised the need for them to provide long-term certainty, transparency and fairness.

Other points were made by respondents about the government needing to be transparent about how derogations will be granted, while there were also comments from some respondents about their desire to work with the government to define clearly the nature of derogations from ZEV mandate requirements.

Some environmental NGOs, energy suppliers and manufacturers envisaged that the certificate trading system removes the need for derogations. Some trade bodies indicated that derogations would not be needed for small volume/specialist manufacturers of sports or military vehicles, who might not immediately be compliant with the ZEV mandate, as they can buy certificates to comply in order to comply with ZEV targets.

Government response

As with exemptions, there is general support and an understanding of the need for derogations within the ZEV mandate. The government understands calls to remove derogations but recognises that there are genuine technological and economical challenges for some smaller manufacturers in switching to ZEVs according to the same timeline as larger volume manufacturers. Specifically, for SVMs, many of whom are in the specialist or high-performance markets, the need for time-limited derogations is pertinent to enable them to viably transition due to reduced capacity.

In recognising this, like other ZEV and CO2 regulations across the world, e.g. California, Canada and in the EU, the government can see the need for derogations in the UK’s ZEV mandate. We, therefore, propose the inclusion of a small volume derogation from ZEV mandate requirements for manufacturers registering fewer than 2,500 vehicles per annum.

From 2024 to 2029, these manufacturers will not be required to meet any ZEV targets and instead will be allocated allowances for 100% of their car or van sales within the respective schemes. If the manufacturer does sell ZEVs or earns ZEV credits, they will have excess allowances, which may be traded or banked. All of these manufacturers will still have to end the sale of new petrol and diesel cars and vans by 2030, and be zero emission at the exhaust by 2035.

With respect to the non-ZEV CO2 regulation, as under the current regulations, all vehicle manufacturers registering more than 1,000 vehicles per annum (micro volume manufacturers, MVMs) would be exempt from the CO2-based regulation until 2030.

No additional derogations for the non-ZEV CO2 regulation are proposed as CO2 targets will be manufacturer specific and based on requiring no improvements from manufacturers’ own prior performance. Therefore, there is considered to be no need for a small or niche volume derogation as under the current regulations now.

Part E: Regulating CO2 emissions in the new non-ZEV fleet

This section covers both questions 6a and 6b of the consultation which specifically explored how the non-ZEV portion of the fleet i.e. petrol, diesel, and hybrid vehicles, should be regulated, and whether the chosen CO2 regulation should be linked to the ZEV mandate.

Question 6a. What are your views on how the CO2 emissions regulation is linked, not linked or part linked to the ZEV mandate certificate system?

The majority of respondents to this question, representing just under a third of total respondents of the consultation, felt that the ZEV mandate and non-ZEV CO2 regulation should not be linked. The reason often cited for keeping these 2 regulatory regimes separate was that linking the 2 would weaken the effectiveness of the entire regime. Particular concerns were raised on allowing overcompliance with the non-ZEV CO2 element to feed into the ZEV mandate, as this could result in fewer ZEVs being deployed and instead encourage the production of more hybrids. This viewpoint was shared between energy providers, environmental NGOs, pro-EV organisations, CPOs and some vehicle manufacturers.

In contrast, a small group of respondents, comprised of mainly vehicle manufacturers, supported linking the ZEV mandate and non-ZEV CO2 regulation.

Government response

The ZEV mandate will be the primary lever the UK is adopting to transition to ZEVs and encouraging a quicker rollout will ultimately bring the associated environmental benefits sooner. Therefore, to incentivise the production of more ZEVs, the government is proposing to allow, with minimal limitations, the transfer of excess allowances from overcompliance with ZEV targets into allowances to be used to comply with the non-ZEV CO2 regulation. The car and van schemes will remain separate, with excess car ZEV mandate allowances transferable to the non-ZEV car CO2 regulation, and excess van ZEV mandate allowances transferable to the non-ZEV van CO2 regulation only.

The government recognises that manufacturers have made substantial investments in non-ZEV efficiency technologies to comply with the current CO2 regulation. In recognition of the benefits of these investments and lags in shifting product cycles, we propose that during the first 3 years of this framework, manufacturers that continue to reduce the average emissions from their non-ZEV fleet be able to use that benefit towards their ZEV mandate targets. Unused CO2 allowances from the car scheme may be converted to car ZEV credits, and unused CO2 allowances from the van scheme may be converted to van ZEV credits. This will be subject to several limitations. The rate of transfer will be based on the real-world CO2 emissions of non-ZEV vehicles, which are higher than reflected in test cycles. We also propose capping the number of ZEV credits which may be earnt in this way to 25% of the ZEV target in each year from 2024 to 2026.

Question 6b. Do you agree or disagree with our initial intention for how the CO2 regulation will operate?

The vast majority of respondents agreed with the government’s proposal of setting a non-ZEV CO2 regulation based on a manufacturer’s non-ZEV average CO2 baseline in a given year with no, nominal, or small reductions. Many respondents reasoned that the ZEV mandate should be the primary mechanism for cutting emissions, therefore the non-ZEV CO2 regulation should only play a supporting role to ensure overall emissions do not increase. This had wide support from stakeholders including manufacturers, environmental NGOs, and energy groups.

Of those who are supportive, some provided specific detail on how they felt the non-ZEV average CO2 baseline should be set. Views included:

• ensuring the CO2 baseline included the whole vehicle fleet, i.e. both ZEV and non-ZEV
• adopting an average CO2 target with no weight adjustment, with weight adjustment, or to use a total CO2 approach; and
• setting reference years as a basis for assessing manufacturer CO2 emissions – years suggested ranged from 2018 to 2022

Conversely, other stakeholders felt that any CO2 targets set for the non-ZEV fleet should tighten over time. There were some suggestions for this reduction to be a challenging, in line with the CCC’s proposals or to be a year-on-year reduction.

Some stakeholders explained that tightening targets would not detract from manufacturer investments in ZEV technology. This viewpoint was shared between a spread of stakeholders including transport operators, pro-EV organisations, manufacturers and research institutes. There were also requests for the government to provide more detail on how this baseline CO2 will be set.

Government response

Feedback was largely positive on the government’s initial preference for adopting an average CO2 baseline for the non-ZEV portion of the fleet requiring no, nominal, or small reductions. Many agreed that the proposals recognised the primacy of the ZEV mandate as the main lever to reduce CO2 emissions, whilst ensuring emissions from this sector do not increase. This has been expanded upon in the final ZEV mandate consultation.

A number of suggestions were made on how the baseline should be set and upon a thorough review, the government proposes it should be based on a manufacturer’s unweighted, actual average CO2 emissions from new non-ZEV cars and vans (separately) in 2021. The targets will be manufacturer specific, rather than a fleet average, to ensure that targets are fairly set and achievable by each manufacturer. This will ensure manufacturers do not need to make substantial investments to improve the CO2 of their non-ZEV fleet.

Considering the baseline year, pre-2019 the CO2 emissions standards that governed new cars and vans were less stringent; new, stronger CO2 standards were introduced in 2020 and 2021 which resulted in increased ZEV uptake and reductions in non-ZEV CO2. The ZEV mandate seeks to build on this by accelerating the decarbonisation of the new vehicle fleet. While the new vehicle fleet may continue to get more efficient in 2022 and 2023, the data for these years will not be available or finalised before this legislation is adopted, and such improvements would be driven more by market forces than by policy. Therefore, we intend to use 2021 as the baseline year to assess the non-ZEV CO2 target.

To protect against the loss of any possible carbon savings as a result of allowing manufacturers to have a weaker target based on a heavier vehicle fleet previously, the new non-ZEV CO2 emissions target will not adapt to changes in mass or powertrain mix.

Next steps

The final consultation on the design of the ZEV mandate was published alongside this document. The consultation expands on the positions set out in this document and provides significant levels of detail on how the future regulation will function.

The new consultation sets out the government’s proposals for:

• who the ZEV mandate will apply to
• how it will operate
• the flexibilities that will be adopted
• how the non-ZEV portion of the fleet will be regulated

Following its conclusion, all stakeholder views will directly feed into the final ZEV mandate and CO2 emission regulation framework that the government drafts into legislation.

It is expected that the government will bring legislation before Parliament in 2023. For both new cars and vans the ZEV mandate and CO2 regulation are planned to enter into effect on 1 January 2024.

List of questions

Question 1a. What is your view on the potential trajectories the ZEV mandate for cars should follow and why?

Question 1b. What is your view on annual targets for cars?

Question 2a. What is your view on the potential trajectories the ZEV mandate for vans should follow and why?

Question 2b. What is your view on annual targets for vans?

Question 3a. What is your view on how the certificate system should operate and on our initial long list of potential vehicle attributes that could be rewarded/incentivised?

Question 3b. Please provide detail on options you specifically support or oppose.

Question 3c. Are there additional options not listed we should consider?

Question 3d. What are your views on how flexible the ZEV certificate system should be over time?

Question 4a. What are your views on our initial preferences for the certificate scheme to not allow any form of banking, borrowing, or pooling? Please explain your reasoning.

Question 4b. Should trading only take place in the same period in which the certificate is earnt or should it be more flexible than this?

Question 4c. Should or shouldn’t there be a minimum price set for selling certificates and/or a cap on the number of certificates that can be earnt in a year by a vehicle manufacturer?

Question 5a. Do you have any concerns with the proposal to ‘link’ the 2 legal entities of one manufacturer responsible for new car and van registrations in the UK, purely for the purposes of the ZEV Mandate and accompanying CO2 regulation?

Question 5b. Please provide specific detail on the specific vehicle types you believe should be exempt from ZEV mandate requirements, for both cars and vans, with clear reasoning?

Question 6a. What are your views on how the CO2 emissions regulation is linked, not linked or part linked to the ZEV mandate certificate system?

Question 6b. Do you agree or disagree with our initial intention for how the CO2 regulation will operate?

List of respondents

Ariel Motors

Arrival

Association for Consultancy and Engineering

Association of British Insurers

Aston Martin Lagonda

BEAMA

Bentley

BMW Group

BorgWarner

Briggs Automotive Company

British Standards Institute

British Vehicle Rental and Leasing Association

Caravan and Motorhome Club

Caterham

ChargePoint

CoMoUK

DecarboniseNow

DPD Group

E.ON

Easee

EDF

Energy UK

EO Charging

EV100 – The Climate Group

EVA England

EVA Scotland

FairCharge

Ford

Green Alliance

Greenpeace

Greenspeed

Gridserve

Honda

International Council Clean Transport

INEOS

Japan Automobile Manufacturers Association

Jaguar Land Rover

London Electric Vehicle Company

LKQ Euro Car Parts

Lloyds Banking Group & Lex Autolease

LV

Maxus UK

Mazda

McLaren

McMurtry Automotive

Mercedes

MG Motors

Motability

National Composite Centre UK

New Automotive

Nissan

Octopus EV

Onward

PGMBM

PodPoint

Private individual

Private individual

Private individual

RAC

Renewable Energy Association

Renault

Renault Trucks

Road Haulage Association

Royal Mail

Society of Manufacturing, Motors and Trading

Ssangyong

Stellantis

Suzuki

Transport and Environment

Tesla

Transport for London

Toyota

Uber

Volkswagen Group

Wheelchair Accessible Vehicle Convertors Association

Zemo

1. S. 44 sub s. 2a, Climate Change Act 2008 (www.legislation.gov.uk/ukpga/2008/27/section/44). ↩

2. S.44 sub s. 2b, Climate Change Act 2008 (www.legislation.gov.uk/ukpga/2008/27/section/44). ↩