Shifting up a gear: The DfT’s response to the ZEV Mandate consultation

At the end of last year, the Department for Transport (DfT) issued a consultation on “Phasing out sales of new petrol and diesel cars from 2030 and supporting the Zero Emission Vehicle transition”. Focusing on the Zero Emission Vehicle (“ZEV”) mandate (as implemented by the Vehicle Emissions Trading Schemes Order 2023 (“VETS”)), the consultation sought to clarify the government’s position on the phase out of internal combustion engine (“ICE”) powered vehicles. We blogged about our thoughts on the consultation at the time. 

The consultation response has now been published, citing over 600 responses from individuals and organisations. 

What has the government’s response confirmed? 

The response confirms a number of key details in relation to the mandate and the phase-out of ICE vehicles:

Phase Out Dates:

• It was reconfirmed that the government is committing to ending the sale of new ICE cars by 2030, and new ICE vans by 2035. 
• As previously suggested, and reiterated by Kier Starmer in a speech earlier this month, new hybrid vehicles will continue to be permitted to be sold between 2030 and 2035. The government has now confirmed that both “full” and plug-in hybrids will be permitted. 

Flexibility to the ZEV Mandate 

• Manufacturers are permitted to transfer CO₂ allowances from their non-ZEV fleet to help offset a shortfall in ZEV sales. The transfer mechanism was previously permitted until 2026 only but is announced to be extended to 2029, with annual caps on transfer also being increased (for example, in 2025 increased from 45% to 90% and in 2026 from 25% to 80%). 
• DfT has similarly extended the current ability for manufacturers to “borrow” their ZEV allowances from future years in 2024-2026 out to 2029. 
• DfT has also indicated that it will explore “more innovative credit models” in the longer term, such as models which particularly incentivise the development of vehicles with bidirectional charging capabilities (essentially meaning an ability to use a vehicle’s battery as part of a home, or ultimately wider grid balancing, when plugged in).
• The non-compliance payment has been reduced from £15,000 to £12,000 per car, and from £18,000 to £15,000 per van. These are fines that apply per vehicle when manufacturers don’t meet their targets. However, DfT has said that these figures are subject to further engagement with the industry on detailed legislation. 

Exemptions

• It is noted that the majority of respondents thought that requiring micro and small volume manufacturers (“MVMs” and “SVMs”) to decarbonise by 2030 (or 2035 in the case of ICE vans) was too burdensome economically. DfT confirmed that MVMs will be exempt from the transitional requirements through to 2035. 
• This exemption was extended to cover SVMs, special purpose and kit vehicles. Unlike MVMs, SVMs will have to apply for a bespoke derogation from the requirements between 2030-2035. 
• It was however confirmed that 100% of new cars and vans must be zero emission by 2035 – even those benefitting from an initial exemption. 

What is left unanswered?

One of the biggest questions that came from the consultation phase was how demand for ZEVs would be supported and encouraged (Question 8), in order to align consumer interests with the requirements being placed on manufacturers. There was a consensus in the consultation responses that there is a lack of support for private car buyers.  Industry stakeholders suggested various incentives, such as the Plug-in Car Grant (“PiCG”). The PiCG encouraged the uptake of electric vehicles by offering financial grants, reducing the list price of new ZEVs, but the scheme ended for cars in 2022. Other suggestions included improving EV chargepoints and second-hand market support. 

Despite these concerns and suggestions from industry stakeholders, the government did not find a consensus on a solution to these worries. The government’s response reiterated their previous actions, including supporting over 75,000 publicly available charging devices. The response states that the government will continue to work with Ofgem in relation to EV charging affordability, but fails to give any measurable proposal or clarity on the issue. 

Next steps

This response gives much needed clarity in certain areas, although some questions remain. The DfT say they will continue to define regulatory mechanisms to support the ZEV transition. Further consultation phases are expected occur prior to 2030, and it will be interesting to see how the government supports the industry and consumers in this transition period. 

If you would like any further information, or advice related to any of the topics covered in this article, please contact Chris Lewis or Charlotte Robinson.

This response suggests a number of amendments to the Zero Emission Vehicle Mandate – the world’s most ambitious decarbonisation measure of its kind. While technical in nature, these amendments will have a significant impact on manufacturers’ ability to decarbonise in a manner that is sustainable for them – providing short-term flexibility to ensure that jobs and investment remain in the UK as we pivot towards electric vehicles.

https://www.gov.uk/government/consultations/phasing-out-sales-of-new-petrol-and-diesel-cars-from-2030-and-supporting-the-zev-transition/outcome/phasing-out-sales-of-new-petrol-and-diesel-cars-from-2030-and-supporting-the-zev-transition-summary-of-responses-and-joint-government-response