My Lords, I thank all noble Lords for their consideration of this draft Order in Council. I will now respond to the specific points raised where I can, but I assure noble Lords that, where I miss any points raised, I will endeavour to ensure they are answered in writing.
The order creates four trading schemes: the car registration trading scheme, known as CRTS, the car carbon dioxide emissions trading scheme, knowns as CCTS, and equivalents for vans known as VRTS and VCTS. The car schemes, CRTS and CCTS, may interact with one another but not with the van schemes. The van schemes, VRTS and VCTS, may interact with one another but not with the car schemes. The CRTS and VRTS schemes apply the ZEV targets and the CCTS and VCTS schemes apply the carbon dioxide targets. This structure enables manufacturers to pursue multiple routes to compliance with their ZEV and carbon dioxide emissions targets.
Compliance in the trading schemes is tracked using units called allowances and credits. Each of the four trading schemes has its own allowance, and the two trading schemes that enforce the ZEV targets have their own credit. One credit is worth one allowance in the respective trading scheme.
Each year, the administrator of the trading schemes will allocate manufacturers enough allowances in each trading scheme, based on their in-year sales so that, if they meet their targets, they will require no allowances in addition and will be able to sell the excess to other manufacturers, bank it for future use or convert it for use in another scheme. Manufacturers who sell zero-emission special-purpose and wheelchair-accessible vehicles will receive bonus credits in the relevant scheme, as will manufacturers who sell zero-emission vehicles to car clubs.
The instrument provides a range of tools that facilitate different zero-emission vehicle transition strategies. Manufacturers who overcomply with their ZEV targets may bank that overcompliance for use in later years, convert it into compliance for the carbon dioxide targets at an exchange rate or sell it to other manufacturers. Manufacturers whose sales alone are not enough to meet the ZEV targets may borrow from their own future compliance at an interest rate of 3.5%, convert compliance from the carbon dioxide targets at an exchange rate or buy from other manufacturers.
Borrowing and conversion from carbon dioxide targets to ZEV targets are only allowed for the first three years of the schemes, expiring in 2026, and are capped proportionally to a manufacturer’s total car registrations or van registrations. This approach allows manufacturers to choose a path that makes sense for their business without increasing overall carbon dioxide emissions.
Vehicle manufacturers may trade freely among themselves. The only requirements are a short notification to the administrator of the trading schemes and enough units of compliance to fulfil the transaction. The price of trading units of compliance is determined by the market; however, there is effectively a cap on the maximum price per unit due to the final compliance
payments to government required if a manufacturer does not meet their target. These are set at £15,000 per car in all years, £9,000 per van in 2024 and £18,000 per van from 2025, and, for the carbon dioxide emissions schemes, £86 per gram of carbon dioxide over the target multiplied by the number of non-zero emission vehicles sold.
The Secretary of State for Transport is responsible for the administration of the schemes for the UK. A specialist team in the Department for Transport is working with devolved Administrations and vehicle manufacturers to prepare for scheme commencement, with the vast majority of administrative obligations on manufacturers not falling before summer 2025. Draft guidance has been circulated to vehicle manufacturers as part of a collaborative process to ensure that they have the documentation they need to support this change. Officials are in regular contact with vehicle manufacturers and will continue to engage closely throughout implementation and operation.
On the point raised by my noble friend Lord Lilley on the environmental impact of zero-emission vehicle manufacturers, a battery electric vehicle, the most common type of zero-emission vehicle, produces only a third of the lifecycle emissions of an equivalent petrol car. They can make the best use of the UK’s renewable energy, which already represents around 40% of UK electricity generation and is set to rise to 100% by 2035.
If, after having the opportunity to make use of banking, borrowing, conversions, derogations, pooling and trading, a manufacturer has not met its target it will be required to make a payment. This is set at £15,000 per car for all years, as I said, and £9,000 per van in 2024, rising to £18,000 from 2025 onwards. The payment for missing the carbon dioxide target will be £86 multiplied by the number of non-zero-emission vehicles registered. These amounts are comparable to comparator schemes in the EU, California and Canada. The payment levels reflect the difference in emissions between a new zero-emission and new non-zero-emission vehicle and will serve as an effective incentive to meet targets.
Further to my answer to my noble friend Lord Lilley on the renewable energy mix and the grid, since 2010 renewables have gone from less than 7% of our electricity supply to 48% in the first quarter of this year. The UK will phase out coal from power generation in 2024 and is accelerating the growth of renewables, such as wind and solar, to meet our net-zero target and decarbonise our electricity system by 2035. We have seen £198 billion of investment into low-carbon energy since 2010 and our global leadership is set to attract another £100 billion by 2030. The very technical points that my noble friend raised perhaps deserve a more technical response than I can provide at the Dispatch Box this evening. On that basis, I will make sure that he gets a fulsome response in writing to his points.
The order contains robust provisions that will enable the Secretary of State for Transport to take action where necessary. There are four enforcement powers: to require information, to question an officer of a company and, as a last resort, to obtain a warrant and enter premises, where the final power—to seize documents—may be used. These powers would be
used as a last resort only where all other forms of formal and informal engagement with the manufacturer concerned had been unsuccessful in resolving concerns.
As a result of the trajectory and flexibilities on offer, manufacturers will be able to comply with the requirements of the legislation in 2024 without selling any more ZEVs than they had planned to. Manufacturer commitments to transition to ZEVs by 2030 already amount to more than 67% of the UK car market, with manufacturers such as Ford, Stellantis and Nissan all committed to selling 100% zero-emission new cars and vans by 2030, and all major manufacturers committed to being fully ZEV by 2035. On the point raised by the noble Baroness, Lady Young of Old Scone, when the 2030 end-of-sale date was announced in December 2020, there appeared to be a clear difference in the carbon dioxide emissions performance between some hybrid and plug-in hybrid technologies and normal petrol and diesel cars.
On the point raised by the noble Baroness, Lady Randerson, on wheelchair-accessible vehicles, the Government recognise how important these vehicles are to their users as a vital lifeline that provides freedom and dignity. That is why the order exempts new non-zero-emission wheelchair-accessible vehicles from the requirements. This means that users who continue to need petrol, diesel or hybrid models can continue to access them. The order also applies a bonus credit for any zero-emission wheelchair-accessible vehicles that are registered, recognising the additional manufacturing and value that such a vehicle represents.
The noble Baroness, Lady Randerson, also asked about Northern Ireland regulations. The regulations that apply to Northern Ireland are a scaled-down version of the existing regulations that currently apply UK-wide and will end in Great Britain with the commencement of this order. In broad terms, manufacturers are set individual targets for their average emissions across all the cars or vans that they sell.
I think it was my noble friend Lord Lilley and the noble Baroness, Lady Randerson, who talked about charge-point disparity. On deploying those charge points and geographical disparity, the Government and industry have already supported the installation of over 49,200 publicly available charging devices. The number of local public charge points needed will vary by area and over time, depending on the types of charge point installed, travel patterns and consumer preferences. Setting binding targets at this stage would risk stifling innovative approaches and could lead to the installation of charge points in the wrong place at the wrong time. The Government’s local electric vehicle fund provides over £381 million of funding to all local authorities in England to ensure good coverage of charge points. The funding was allocated to local authorities using a number of set variables, including charge points by population and the level of rurality. The inclusion of the rurality variable means that local authorities in rural areas were allocated additional funding, compared to urban areas.
The noble Baroness, Lady Randerson, mentioned the impact on sales. We consulted on whether we should incentivise certain specifications of vehicles, and responses were overwhelmingly in favour of a simple one vehicle, one credit allowance scheme. Otherwise,
we shall keep this under review. In response to the noble Lord, Lord Tunnicliffe, and the Climate Change Committee, the letter was responded to by Minister Norman during his time at the Department for Transport. We can commit to sending the letter to the noble Lord.
As I have outlined, this legislation sets out a clear pathway for the decarbonisation of new cars and vans. It will allow industry and households to plan confidently for the future. The order will establish the strongest targets of their kind in any country globally and will be a crucial catalyst for new investment, new jobs and new technology, which will drive the transition of our economy to net zero.
I hope I have answered some of the questions. I will certainly go through Hansard and see what is outstanding and write to noble Lords. I commend the order to the House.