ZEV Mandate Series Part 6: Lessons From Abroad
This piece is the final part of a six-part series New AutoMotive has released over the ongoing consultation period for the UK’s Zero Emissions (ZEV) Mandate, over April-May. This series will examine the current government proposals around the Mandate in detail, as well as putting the policy framework into its broader context. In addition to publishing this blog series and submitting a formal consultation response, New AutoMotive will be hosting a webinar event around the ZEV Mandate and the current consultation in the coming weeks. If you are interested in attending this webinar event, you can register your details here.
Transport related emissions account for around one-fifth of all global emissions. To reduce this figure, the transition to electric transport must be global in scale. The introduction of the UK’s Zero Emissions Vehicle (ZEV) Mandate in 2024 is just one piece in a global puzzle. Fortunately, consumers and policy makers around the world are embracing electric vehicles - albeit at markedly different rates. 10.5 million electric vehicles were sold globally in 2022, up from 6.5 million in 2021 - a 47% increase. Public policy has played a massive role in driving the ever-growing popularity of electric cars - particularly in the jurisdictions leading the transition. The details of the policy schemes used to drive EV uptake varies. This piece will examine three very different jurisdictions transitions to electric transport, and the lessons they can provide Britain as it finalises the Mandate prior to its implementation in 2024.
Europe
Given that transport is responsible for around a quarter of the EU’s total emissions output, electric vehicles are clearly a crucial element in achieving the EU’s net zero goal. In 2022, 12% of all new car sales across the EU was for an electric vehicle - up from just 2% in 2019. Over 400,000 electric cars were sold in the EU in Q4 of 2022 alone and Europe accounts for a third of all electric vehicle sales globally. However, the pace of the transition within the European Union is uneven. Western and Northern European nations like Norway (64% EV market share in 2022) are much further advanced in their transitions than Southern and Eastern European countries like Slovakia (1.5% EV market share in 2022) or Cyprus (0.5% EV market share in 2022).
In October last year, EU member states agreed in principle to enshrine the 2035 phase out of all carbon emitting vehicles (including traditional hybrids and plug-in hybrid vehicles) into law - a significant and positive step forward. However, in March a coalition of countries, including Italy, the Czech Republic and Poland as well as Germany, threatened to block the ban unless an exemption that will allow sales of new cars with internal combustion engines that run only on e-fuels was included.. The amendment was made however, it is unclear whether it will successfully pass through parliament and if it does, how it will be implemented.
Lessons From Europe: E-fuels Are All Risk, No Reward
For Britain, the single biggest lesson from Europe is around the risk of embracing e-fuels. At the time of writing, the details on the legislation that will formalise the 2035 phase out date, which includes an e-fuels exemption, are before the European parliament. There is significant confusion around the legal and regulatory details of the exemption. However, assuming the legislation is passed as is, it is a blow for Europe’s aspirations to be a global leader in electric transport. Prior to the introduction of the exemption, Europe was forecast to overtake China and have the highest rate of electric vehicle use in the world by 2030. The impact the e-fuels exemption has on Europe’s transition remains to be seen, but it is unlikely to be positive - the fuels are expensive, inefficient, and most crucially, vehicles which run on them still emit at the tailpipe, lowering local air quality and contributing to a countries transport related emissions just as a diesel or petrol car would. E-fuels are a dangerous pseudo-solution to the transport emissions problem, and Britain would do well to avoid making the mistake the EU has made - there should be no e-fuels exemption in the ZEV Mandate upon its introduction in 2024.
China
China is the world leader in electric transport. In 2022, one in four new car sales were for a battery electric vehicle, and nearly 6 million plug-in electric vehicles were sold in China over the course of the year. Last year, China accounted for just under 60% of total EV sales volume globally. China implemented its New Energy Vehicles (NEV) mandate in 2019. This framework is modelled on California’s ZEV Mandate. The NEV Mandate follows a linear model, and credits, which are limited to six per vehicle, are assigned based on the range and energy efficiency. The Mandate operates alongside the Chinese CO2 regulations, and credits can be traded between the two sets of regulations.
In addition to the NEV Mandate, the Chinese government has provided a number of incentives to encourage drivers to make the switch to electric over the years. The Chinese government started to provide generous subsidies for EV purchase in 2009, and since then the central government has spent more than US$47 billion in total on incentives and subsidies. These subsidies were extended for another year in September last year, despite how costly they are for the government. Beyond 2023, the continuation of these incentive schemes are in doubt - however, combined with the NEV Mandate, they have already contributed to making China the world leader in electric vehicles.
Lessons from China: The Need for Ambition & Complementary Policy Schemes
The first lesson the UK can take from the Chinese experience is that the ZEV Mandate needs to be ambitious in its initial targets, whilst also being designed with the capacity to be reactive inbuilt in the scheme, as to prevent the Mandate simply acting as a backstop. EV take-up in China has thus far outperformed the NEV Mandate, and met the market share target set for 2023 in mid-2022. This means it is currently functioning as a backstop, rather than driving the market. If the growth in EV uptake in China continues to increase at the rate it has over the last three years, there is a risk that EV market share will outperform the Mandate over the life of the scheme - meaning that the NEV Mandate ultimately fails as a tool to drive a more rapid transition. China’s head start on EV uptake means that this would not necessarily be the end of the world. However for Britain, where the transition is not as advanced, a Mandate that simply acted as a backstop would be a damaging blow both to the transition to electric transport and to the country's broader net zero ambitions.
The second lesson is around the usefulness of policy schemes that complement the introduction of a Mandate. As previously mentioned, China has incentivised the uptake of EVs, through tax breaks and grant schemes, for almost a decade and a half - these schemes have played a significant role in winning China its position as the world leader in electric transport. If the UK is to be a global leader in the transition, the implementation of the ZEV Mandate in 2024 must be seen as the beginning, rather than the end, of a broader conversation about how to encourage British drivers to make the switch through public policy. Even after the implementation of the scheme, there are important conversations to be had around incentivising EV uptake via the reform of how VAD is applied to electric cars and vans, the provision of grants on second-hand electric cars, and how the government can best support lower income/higher mileage drivers (the drivers who would benefit most from going electric) in making the switch.
Australia
Australia is relatively behind the eight ball in terms of EV adoption. Climate change and emissions outputs were simply not a priority for the Liberal-Nationals coalition that held government between 2013 and 2022. Electric vehicles accounted for just 3.8% of all new vehicle sales in Australia in 2022. However, there are signs the tide is beginning to turn.
Despite having a small share of the overall market, the number of electric vehicles on Australian roads almost doubled in 2022 - from 44,000 at the beginning of 2022 to more than 83,000 by the year's end. The organic growth in the popularity of EVs in Australia is increasingly being supported through government policy. Last month, the Australian government released its much anticipated National Electric Vehicle Strategy, announced a public consultation on a national fuel efficiency standard, and committed $70 million in funding to be made available under the Driving the Nation Program aimed at fostering innovation in electric vehicle charging solutions across Australia. These moves come on the back of the state and territory governments all implementing various policy measures, including tax breaks and grant schemes, designed to support the take-up of electric cars over recent years.
Lessons from Australia: Global Competition is Heating Up
Australia is a country that has long been a laggard in terms of EV uptake. For several years, it held the dubious achievement of being the only OECD nation to not have, or be in the process of developing, fuel efficiency standards. Yet, in the space of just 11 months, this is beginning to change - the country will soon have a set of standards in place specifically designed to encourage manufacturers to sell their limited stock of electric cars in Australia. The lesson the UK can take from Australia’s journey is that global competition for the supply of electric cars will only increase in the coming years. More and more, jurisdictions like Australia, who have historically shunned EVs, will implement policy frameworks designed to ensure the supply of electric cars and vans to their markets. Once both are implemented, the UK’s ZEV Mandate will compete directly with Australia’s fuel efficiency standards, and equivalent policy schemes in other jurisdictions - this competition will be for the allocation of electric vehicle stock. For the UK to win these competitions, in a global field that will only become increasingly cluttered as time goes on, the ZEV Mandate must be ambitious, simple, and strong - ensuring the supply of electric vehicles into the UK depends on it.
Conclusion
New AutoMotive is currently analysing the details of the government’s proposals, and preparing its formal response to the ZEV Mandate consultation. Submissions to this consultation can be made here. In addition to this blog series and a formal consultation response, New AutoMotive will be hosting a webinar event around the ZEV Mandate and the current consultation in the coming weeks. If you are interested in attending this webinar event, you can register your details at the link here, and we will reach out to you with more details as they develop.