Consultation outcome

Government response to the consultation on proposals to regulate CO2 emission performance standards for new passenger cars and light commercial vehicles in the UK

Updated 13 October 2020

Introduction

The UK has left the EU. There is now a transition period until the end of 2020 while the UK and EU negotiate additional arrangements. The current rules on trade, travel, and business for the UK and EU will continue to apply during the transition period. New rules will take effect on 1 January 2021.

Emissions of carbon dioxide (CO2) from new passenger cars and new light commercial vehicles (vans) registered in the EU each year are currently governed by Regulation (EU) 2019/631 ^{[footnote 1]}. This regulation sets a mandatory fleet average CO2 emission target and specific CO2 emissions targets for individual manufacturers. These provisions apply in the UK until the end of the transition period.

Following the end of the transition period, Regulation (EU) 2019/631 will be copied into UK law, and the Department for Transport [DfT] has laid a statutory instrument (SI) to correct for deficiencies arising as a result of retaining an EU regulation in UK law. The SI amends the regulation to ensure it functions in a Great Britain (GB)-only context.

Regulation (EC) 443/2009 and Regulation (EU) 510/2011 had previously set CO2 emissions targets for new cars and new vans respectively. These were repealed and replaced by Regulation (EU) 2019/631 on 1 January 2020.

Although repealed, both EU Regulations (EC) 443/2009 and (EU) 510/2011 are listed in Annex II to the Northern Ireland Protocol ^{[footnote 2]}. As successor regulations are deemed to also be in scope of the Northern Ireland Protocol, Regulation (EU) 2019/631 will continue to have direct effect in Northern Ireland. The retained, domestic version of the regulation will therefore only have effect in GB.

To ensure that this legislation continues to function in GB from 1 January 2021, the government carried out a consultation from 10 July to 21 August 2020 on its proposals to amend the retained EU legislation.

This document summarises the responses to that consultation and sets out the government’s response to the issues raised.

As first set out in the government’s Road to Zero Strategy ^{[footnote 3]}, the UK government intends to pursue a future approach “…that is at least as ambitious as the current arrangements for vehicle emissions regulation”. The consultation and the government’s response are in line with that commitment.

The government’s general approach in transferring the cars and vans CO2 regulations into GB law is to:

• retain policy that supports the delivery of our wider ambitions to reduce CO2 emissions from transport in support of net-zero
• provide certainty to vehicle manufacturers on plans for regulation following the transition period and minimise additional reporting burdens
• ensure that GB regulation is at least as ambitious as the regulatory regime established in the EU
• enable the government to assume the obligations and functions, currently performed by the European Commission, to ensure the regime continues to function in a GB-only context.

The SI is made under the European Union Withdrawal Act (EUWA) 2018. EUWA provisions allow for secondary legislation to be made, for a time-limited period, to correct for any inoperabilities within the newly retained EU legislation. The EUWA does not otherwise allow changes to be made to the retained law to take alternative policy objectives into account.

Noting the above constraints, the consultation document only sought comments on the proposed new GB provisions set out in the consultation document to ensure the operation of Regulation (EU) 2019/631 was practicable and continued to work within the GB-only context.

A total of 18 responses were received to this consultation. The government is grateful for the responses received and values the evidence and opinions submitted. A list of organisations who submitted a response is at Annex 1.

All the responses to this public consultation have been recorded and analysed. The following sets out a summary of the views received and the government’s response.

Consultation response

General

In the main, consultees welcomed the proposals and agreed that they would ensure a continuation of the cars and vans CO2 regulations following the end of the transition period. Continuity of ambition between the GB and the EU regime was also welcomed to provide certainty for both manufacturers and operators manufacturing and registering vehicles across multiple markets.

Several responses referred to how a future GB CO2 emissions reduction standards regime should function and what should be included. As noted in the consultation document, “…the European Union Withdrawal Act provisions require that ministers can only amend the UK statutory instrument for inoperabilities.” Comments outside of these constraints have not been considered as part of this consultation.

The following focuses on the government’s response to the issues raised that were in scope of the consultation and offers further clarification on several issues.

UK targets and specific emissions of CO2 formulae

The European Commission sets mandatory average CO2 emissions targets that the EU’s fleet of new vehicles must reach. Manufacturers receive individual CO2 emission targets based on the average mass of their fleet compared to the average mass of the EU fleet. The heavier the fleet, the higher the individual emissions target. In 2020 the average EU target for cars and vans is 95g CO2/km and 147g CO2/km respectively. In 2021 these targets will be converted into Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and form the basis for the 2025 and 2030 targets.

To ensure manufacturer targets do not change when transitioning to a GB regime, we proposed in the consultation to retain the average mass of the EU fleet value in the formulae.

3 main issues were raised by the consultation responses:

• CO2 targets – some respondees suggested that comparing the UK fleet to the EU average vehicle mass would lead to a weakening of emissions targets, as UK vehicles are, on average, heavier than the EU average. Additionally, it was suggested comparing a manufacturer’s fleet to the EU average mass would also weaken future targets as they are based on the 2021 WLTP baseline. However, other respondees agreed with the proposed position to retain the EU average mass

• 2025 and 2030 WLTP targets – although not explicitly consulted on, further clarity was sought on proposed corrections to EU Delegated Regulations (EU) 2017/1152 ^{[footnote 4]} and (EU) 2017/1153 ^{[footnote 5]} . These regulations establish the correlation procedures that are to be used when the regulations change from using New European Drive Cycle (NEDC)-based targets to WLTP-based targets. It was reasoned as the correlation procedure is based on 2020 data, and that as the subsequent WLTP-based 2021 targets form the baseline for future emissions targets, the full EU dataset should be used for this conversion, rather than simply UK/GB data

• Northern Ireland Protocol – it was raised that the proposed new clause, covering the permanent removal of vehicles from GB to Northern Ireland, or otherwise exported elsewhere, within 6 months of that vehicle’s initial registration in GB, could lead to a situation where vehicles may not be counted in either GB or Northern Ireland (EU) CO2 emissions targets

Government response

CO2 targets – the UK government has a long-standing commitment that vehicle emissions regulations after the transition period will be at least as ambitious as existing arrangements. Therefore, the fleet-wide average target of 95g CO2/km and 147g CO2/km for cars and vans respectively will remain. The formulae which translate those targets will also remain, meaning the EU average mass value will continue to be used to calculate individual manufacturer targets.

As the UK’s average fleet mass is heavier than the EU’s average mass, one of the consequences of adopting the current regime is that the sum of individual manufacturer targets in the UK will be slightly higher than the sum of targets in the EU. While this may therefore appear to be a slight relaxation of standards, by retaining the average EU mass value, it replicates the same level of effort required by manufacturers as under the current scheme in the EU. This ensures that the regulation is as ambitious as existing arrangements. If the UK average mass value was used to calculate manufacturer targets instead, it would make targets immediately more challenging. The average mass value is updated every 3 years: on the first such occasion, the UK average mass will be used.

2025 and 2030 WLTP targets –Regulations (EU) 2017/1152 and (EU) 2017/1153 establish the correlation procedure to be used during the regulation’s conversion from using NEDC-derived targets and calculations to WLTP-derived targets and calculations. While the corrections needed to ensure these regulations continued functioning in GB are minor, manufacturers requested clarity on whether the EU or UK/GB new vehicle dataset would be used for the correlation procedure. In line with the commitment to ensuring that future regulation is at least as ambitious as current arrangement s, the full EU dataset will be used as the basis for this correlation.

Northern Ireland Protocol – the current EU regime has an import clause which states that if any vehicle is registered outside of the EU and then subsequently imported within 3 months, it will count towards EU CO2 emissions targets as a new vehicle. There is no export clause for vehicles that registered in the EU and then exported. This, therefore, could lead to a situation whereby vehicles moving between GB and Northern Ireland (which will be under the EU scheme), and vice versa within 3 months of registration will be counted in both regimes.

Therefore, a clause was proposed, stating that if vehicle a moved permanently from GB to Northern Ireland (or was exported elsewhere) within 6 months of the vehicle’s first registration in GB, it would not count towards GB CO2 emission targets. However, this inadvertently led to a situation where if that vehicle was permanently moved/exported after 3 months, but before 6, it would not count towards either GB or Northern Ireland (total EU) emissions. Therefore, this timeframe has been reduced from 6 months to 3.

Sales volumes and derogation thresholds

Derogations protect the competitiveness of smaller vehicle manufacturers who may lack the resources to invest in carbon reduction technologies compared to larger manufacturers. Manufacturers approved for a derogation receive different types of emissions target.

Derogation thresholds are currently based on EU sales, if these thresholds are adjusted to the UK’s fixed share of the EU market (that is, 15%-20%), it would lead to complications. Those that sell higher or lower proportions of vehicles in the UK compared to EU could change categories and face changing emissions targets with the potential of fines.

Therefore, we proposed to base derogation thresholds on individual manufacturer’s historical share of EU sales that occurred in the UK in 2017. A formula has been created allowing individual manufacturers to calculate their derogation threshold. Consultees were asked if they have any comments on this approach, or if there were any unintended consequences.

The responses received were generally supportive of the proposal with most responses agreeing it was a balanced approached. However, a few consultees raised the following concerns:

• the level at which vehicle manufacturers are classed as being in scope of CO2 targets has been kept at 1,000 vehicle registrations – it was argued that allowing manufacturers with fewer than 1,000 new vehicle sales in GB (the same amount as the EU allows) to be exempt for CO2 regulation is disproportionate: it was argued that this may result in established vehicle manufacturers in GB not being subject to CO2 regulation when they should be and suggested the threshold should be reduced to match the UK’s overall share of the EU market, 15% and 19% for cars and vans respectively

• derogation thresholds – it was argued that, instead of using a historical share, it should be a fixed share of the UK’s sales: this is because manufacturers with more sales in the UK compared to the EU will be subject to less ambitious targets

Government response

In response to retaining the level at which vehicle manufacturers are classed as being in scope of CO2 targets being kept at 1,000 vehicle registrations – manufacturers currently classed as being out of scope of the regulation are typically specialist manufacturers that focus on a single country market as opposed to selling cars and vans across the whole of the EU.

Due to this, the 1,000-vehicle threshold will be retained as manufacturers that focus solely on the UK and are currently out of scope of the EU regulation would be severely impacted by a reduction in this threshold for a GB-only regulation.

Regarding derogation thresholds – as outlined in the consultation document, one of the government’s key approaches to translating this EU regulation is to provide certainty to vehicle manufacturers. Therefore, by basing threshold limits on a manufacturer’s historical share of EU sales occurring in the UK, it offers stability for those currently benefitting from derogations, while still ensuring that if a manufacturer increased its registration levels, they may become subject to tougher targets.

As such, the methodology, deriving individual manufacturer derogation thresholds by considering the historical share of EU registrations occurring in the UK in 2017, will be adopted. In time, it may be appropriate to move to a fixed value: the regulation covers this scenario and in due course, this will be explored.

Eco-innovations

Eco-innovations are technologies that reduce CO2 emissions in the real world but aren’t captured during the emissions test procedure. Manufacturer’s deploying such technologies may apply for ‘eco-innovation approval’ and then apply for credits which can be used against their CO2 emission targets.

We proposed in the consultation to approve all existing EU eco-innovations, however, after 1 January 2021 manufacturers will have to apply to Secretary of State for it to be approved in GB. This will be in addition to the approval required under the EU regime. The approval process in GB will be the same as the EU’s current process now.

All responses were supportive of the proposal to recognise all EU approved eco-innovations before 1 January 2021 in GB legislation. However, some consultees requested that a mutual recognition system between the UK and EU be created, allowing for all EU eco-innovations approvals to be instantly be approved in the UK, or for the systems to be aligned as closely as possible.

A couple of consultees sought conformation on whether the eco-innovation multipliers in 2021 to 2023, as outlined in Article 6 of (EU) 2017/1153, would be available.

Government response

The UK is now independent of the EU, therefore, applying for an eco-innovation approval in GB is necessary. The government recognises that applying for eco-innovations approval in both GB and the EU, may increase the administrative burden on manufacturers, therefore steps have been taken to mitigate this. As outlined in the proposal, the government will:

• retain all existing eco-innovations approved before 1 January 2021
• keep the GB approval process the same as the EU process as far as possible
• allow GB manufacturers to work with EU technical services, and to accept data supplied by EU technical services as part of a GB eco-innovation application.

The government will also allow manufacturers to provide proof of an EU eco-innovation approval adopted after 1 January 2021, although this proof on its own will not grant an automatic approval in GB.

These steps will ensure that the 2 separate approval systems are as closely aligned as practicably possible.

Full guidance on how to apply for an eco-innovation approval will be available as soon as is practicable.

Regarding eco-innovation multipliers from 2021 to 2023, the 1.9, 1.7 and 1.5 multipliers for 2021, 2022 and 2023 respectively, will be retained.

Super-credits

Manufacturers can benefit from super-credits when registering new zero or low emissions vehicles (ZLEVs). These credits can then be used against their emissions target. This acts as an incentive for manufacturers to put more ZLEVs on to the market as they will be counted as the below multipliers. The amount that manufacturers may benefit from the use of super-credits is capped at 7.5g CO₂/km cumulatively over 2020-2022.

• 2 vehicles in 2020
• 1.67 vehicles in 2021
• 1.33 vehicles in 2022

We proposed that as the 2020 multiplier will no longer exist, and to reflect the fact that they will apply over 2 years rather than 3, the cap should be reduced to 3.75g CO2/km over 2021 and 2022.

Overall, consultee responses were opposed to the proposals in the consultation. However, the nature of this opposition was polarised:

• some argued that the 3.75g CO2/km cap is too low, unfairly affecting those who want to bring more ZLEVs to the market in 2021 and 2022, and acted as a disincentive to put new ZLEVs on the market
• others argued that the 3.75g CO2/km cap is too high: this is because many manufacturers could have already used up to a possible 7.5g CO2/km in 2020 alone under the EU scheme - it was further suggested that super-credits should apply to zero electric vehicles (ZEVs) only, however, this is beyond the scope of the changes permitted by the EU Withdrawal Act

Government response

Regarding the super-credit cap of 3.75g CO2/km being too high or too low – it’s evident via the nature of the responses that this issue is complicated. An increase in the super-credits can act as an incentive for car manufacturers to put more ZLEVs on to the market, which is in line with the government’s net-zero and decarbonisation commitments.

Equally, the government recognises super-credits can artificially lower manufacturer targets, thus providing the opportunity for higher emission vehicles to be sold. There’s the possibility that manufacturers will use their EU-allocated 7.5g CO2/km cap in 2020 alone, meaning the 3.75g CO2/km cap available across 2021 and 2022 will be in addition to the super-credits offered in the EU regime. Whilst this is possible, due to the timelines for enforcing the regulation, it will not be known until October 2021. Following consideration of these views, the proposed super-credit cap of 3.75g CO2/km will remain.

Minor and technical changes

This section mainly refers to the minor or technical changes that have been made throughout (EU) 2019/631 to ensure it continues to work sensibly in the UK context. For example:

• changing European Commission to Secretary of State
• changing European Union/Community to United Kingdom/Great Britain
• removing expired clauses
• converting the excess emissions premium of €95 per gram per vehicle to £86 per gram per vehicle

The changes posed in this section were broadly supported by consultees with relatively minor comments overall. The concerns raised all centred around excess emissions premiums. It was argued that a stabiliser is needed to account for fluctuating exchange rate changes between sterling and the euro.

Government response

The excess emission premium of £86 per gram of exceedance multiplied by the number of registered vehicles reflects the current exchange rate. This is so any fines given will be equal to those in the EU.

As the UK is now independent of the EU, and given the boundaries of the EU Withdrawal Act, a stabiliser, effectively tying the regulation to the euro, will not be introduced.

The regulation already includes a requirement for a review, assessing the effectiveness of the full regulation, to be completed by 2023. This review may be accompanied by legislative proposals to improve the effectiveness if so required. We will use this opportunity to assess the excess emission premium level and amend the amount if required.

Annex 1

Organisations responding to the consultation

• private individual

• private individual

• T&E

• Ford

• Kia Motors (UK) Ltd

• Better transport

• BVRLA

• The Climate Group

• Groupe PSA

• The Institution of Engineering and Technology (IET)

• Logistics UK

• ClientEarth

• Tesla

• Energy UK

• CATAGEN

• SMMT

• Pod Point

• Jaguar Land Rover

1. Regulation (EU) 2019/631 ↩

2. Northern Ireland Protocol ↩

3. Road to Zero Strategy ↩

4. Regulations (EU) 2017/1152 ↩

5. (EU) 2017/1153 ↩