What’s in a date?

October 25, 2020

The UK’s coal phase-out shows the Government how to phase-out petrol and diesel cars.

he Guardian reports that Ministers are considering banning the sale of new petrol and diesel cars by as early as 2030, following calls from the Conservative MPs, the Government’s independent advisers on climate change, and the Labour Party. However, the UK is not yet on track to meet the Government’s existing target of 100% Zero Emission Vehicles (ZEVs) by 2040, mainly due to a lack of an overarching policy to deliver the petrol and diesel phase-out. In contrast, the Government is overachieving against its 2025 target for the phase-out of coal. The collapse in demand for coal in the UK shows that, as well as announcing an earlier date for the petrol and diesel phase-out, the Government needs to set out the policy framework to achieve it. As Policy Exchange argued in a recent report, the Government should announce a California-style Zero-Emission Vehicle mandate (‘ZEV mandate’), complemented by increased investment in EV charging networks.

On its own, a phase-out date is not enough to deliver the end of petrol and diesel

The Government is consulting on the phase-out of petrol and diesel internal combustion engine (ICE) cars by 2035 or earlier, bringing forward the UK’s current 2040 phase-out date. This increased ambition is welcome, not least because the Committee on Climate Change says that it is necessary to achieve Net Zero emissions by 2050. However, as the chart below shows, the UK is not yet on track to meet the existing 2040 target. Despite doubling in the last year, only 8% of new car sales were electric vehicles in the first half of 2020, a figure inflated by the collapse in demand for petrol and diesel vehicles during the coronavirus lockdown. The 8% figure is also flattered by the inclusion of plug-in hybrid electric vehicles (PHEVs), which have both a battery and a petrol or diesel engine; PHEVs currently account for around half of EV sales in the figures. The Government is now consulting on banning hybrid vehicles such as PHEVs by 2035 or earlier, alongside petrol and diesel vehicles.

The UK’s relatively slow progress towards phasing out ICE cars is in stark contrast to the Government’s success in phasing out coal. In 2013, coal power provided nearly 40% of the UK’s electricity. By 2019, coal’s market share had fallen dramatically to just 2%, well ahead of the Government’s commitment to phase out coal power by 2025. The decline of coal was primarily driven by the introduction of the Carbon Price Support (CPS) tax in the electricity sector in 2013, alongside the growth of renewable energy sources and strict new air quality regulations on coal power stations. This carbon tax made coal power stations more expensive to run than gas power stations, which have lower carbon emissions. The 2025 coal phase-out date was only announced in 2015, two years after the introduction of the CPS tax, by which point the market share of coal power stations was already falling sharply. The coal phase-out shows that announcing an end date is less important than implementing the policies that will deliver it.

A Zero-Emission Vehicle mandate is the key to delivering the petrol and diesel phase-out

In the case of coal, ambitious policy measures led to far deeper reductions in coal consumption than would have been expected at the time. In the next few weeks, the Government is expected to announce a new phase-out date for petrol and diesel cars that could be as early as 2030. It needs to show how this will be delivered. Every delay in establishing a clear policy mechanism will raise the cost of delivering the ambitious target.

Policy Exchange’s recent report, Route ’35, argued that a California-style ZEV mandate should be the anchor policy to deliver the phase-out of petrol and diesel cars. A ZEV mandate can be applied to whichever phase-out date that the Government decides and will also allow the Government to gradually remove grants and favourable tax treatment for EVs. This will free up limited funds to spend on expanding the UK’s EV charging network, which will need to grow by as much as 30% per year between now and 2030.

The Government is poised to announce an ambitious phase-out date for the sale of new petrol and diesel cars. However, without clear new policies, sales of EVs are likely to quickly lag behind the required trajectory and the uncertainty will undermine investor confidence in the car manufacturing sector. The Government should instead learn from the success of the UK’s coal phase-out, where supportive policy delivered a collapse in emissions from coal power stations well ahead of the phase-out date. As we have previously argued, a California-style ZEV mandate holds the key to the phase-out of petrol and diesel cars. Therefore, alongside the announcement of a new phase-out date for petrol and diesel cars, the Government should announce a ZEV mandate to deliver the date.

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