Road Vehicle Carbon Dioxide Emission Performance Standards (Cars and Vans) (Amendment) (EU Exit) Regulations 2021
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Baroness Vere of Norbiton
That the Grand Committee do consider the Road Vehicle Carbon Dioxide Emission Performance Standards (Cars and Vans) (Amendment) (EU Exit) Regulations 2021.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con) [V]
My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018. The regulations amend Regulation 2019/631 and Regulation 114/2013, both as amended by prior EU-exit SIs. Regulation 2019/631 sets carbon dioxide emission standards for new cars and vans in Great Britain, while Regulation 114/2013 establishes the rules for applying for a derogated target.
An EU-exit SI amended the EU regulations and established car and van carbon dioxide emission standards in Great Britain only, as the regulations were originally listed in Annexe 2 of the Northern Ireland protocol, meaning that Northern Ireland would continue to be captured by the EU regime. The current fleet average carbon dioxide emission target for cars is 95 grams of carbon dioxide per kilometre, and for vans it is set at 147 grams of carbon dioxide per kilometre.
Manufacturers are set individual targets based on the mass of their fleet compared to the average mass of the entire Great British fleet. The heavier a manufacturer’s vehicle, the higher their target, and vice versa. All targets average out to either of the headline targets as aforementioned. The target for both cars and vans will tighten further in 2025 by 15%, and in 2030 by 31% for vans and 37.5% for cars, when compared with the 2021 baseline. Fines are levied for non-compliance with these targets.
The regulations allow for flexibilities to be granted to help manufacturers in certain circumstances to reach their target. One of these flexibilities is derogations. Smaller manufacturers can apply for a derogated target which is more in line with their technical and economic capability. Pooling is another flexibility. This is where manufacturers can join together for the purposes of the regulation and will be given one target. Manufacturers can also receive credits for using carbon-dioxide-reducing technologies in their vehicles that are not taken into account during the carbon dioxide test procedure, such as LED bulbs. More credits can be earned, up to a certain limit, when a manufacturer puts more zero and low-emission vehicles on the market. These are called super-credits and are available across 2021 and 2022.
Regulation 114/2013, as amended by two previous EU exit SIs, is a tertiary piece of legislation which further sets out the rules and procedures for manufacturers when applying for a derogation. The withdrawal Act retained EU Regulations 2019/631 and 114/2013 in their entirety on exit day in UK law. These were amended by a prior EU exit SI, 2020/1418, and set obligations in GB only, due to the Northern Ireland protocol. The draft instrument under consideration today reflects changes made to the Northern Ireland protocol by the Joint Committee. On 18 December, the EU regulations were removed from Annexe 2 of the protocol, leaving Northern Ireland without any car and van carbon dioxide regulation. This instrument will therefore extend the domestic regulations to Northern Ireland from 1 September, in effect creating a UK-wide regime.
The amendments throughout the regulations primarily replace “GB” with “UK”. However, a provision was added stating that new car and van registrations in Northern Ireland prior to 1 September were out of scope of the regulations, including all target calculations. This SI is essential to ensuring that new cars and vans in Northern Ireland are subject to the same carbon dioxide emission standards as elsewhere in the UK.
The regulations are necessary to ensure that the UK achieves its net-zero ambitions and legally binding carbon budgets. I beg to move.
Baroness Vere of Norbiton (Con) [V]
I thank all noble Lords for their consideration of these draft regulations. I will add a bit more colour to the issues relating to the regulations and I will come on to other matters if I can; otherwise, I will write.
First, I point out in relation to the devolved nations and consultation that, because this is a Northern Ireland regulation, we obviously engaged with Northern Ireland officials on our plans to regulate carbon dioxide emissions and my colleague, Minister Maclean, sent a letter to the Secretary of State for the Northern Ireland Department for Infrastructure, Nichola Mallon, informing her of this SI being laid on 8 June.
Let us go back to how we got into this situation. It was because the regulations were removed from the Northern Ireland protocol at the last minute. This was a decision taken by the UK-EU Joint Committee; therefore, when we did the previous EU exit SI, it was drafted on the basis of agreed international law at that point, and the regulations therefore covered only GB. It was anticipated that Northern Ireland would be in the protocol and then obviously that turned out not to be the case. Both the UK Government and the European Commission formally agreed that these regulations were not needed, so it was not a decision of the UK Government alone. Because this decision came relatively late, as noble Lords will know—it was on 18 December —we were unable to lay an SI to extend the regulations to Northern Ireland prior to the end the transition period in 2020. I accept that that created a gap in the law, which is what noble Lords are being asked to rectify today.
The noble Lord, Lord Berkeley, asked why it took so long—he said it more nicely than that. The extent of the gap in the law—the setting of the date of 1 September, which is the date when these regulations would come into force—was dependent on two factors. The first is that the process of laying an SI takes many months and cannot be done very quickly, especially when it needs consultation with stakeholders. The second is the impact on manufacturers and their views following a consultation. The date of 1 September is actually a fairly short delay to what would otherwise have been achieved, and it provides manufacturers with a certain date from which the changes will take place and time for them to adapt. The need for this was voiced by stakeholders at a VCA and DfT workshop, where concerns about the regulations coming into force immediately were expressed.
Manufacturers were essentially given very short notice of the Government’s intention to change the regulation for Northern Ireland, which would have meant that new cars and vans sold in Northern Ireland would start counting towards their domestic targets immediately, but fleet compositions are typically set out well in advance. They would not have known about or been able to plan for the new regulatory regime. Northern Irish registrations, and the resulting carbon dioxide emissions, as a share of UK totals are far more significant than the same registrations in the EU. Therefore, extending the regulations to Northern Ireland could have impacted on manufacturers’ emissions.
In addition, a key concern for manufacturers is their ability to forecast their sales for the year. Manufacturers may know the vehicles they plan to sell in the UK, but they are not in control of where or when during the year they will be sold. For example, if in a particular year more electric vehicles were sold in the first half than the second, and if you suddenly included Northern Irish vehicles from, say, July onwards, that might artificially distort the manufacturers’ average emissions and you would therefore get a distorted image. Essentially, if we use the registration data from 1 September instead, the likelihood of that distortion falls away and the industry has time to plan and adapt.
Although it is the case that carbon dioxide emissions from newly registered cars and vans in Northern Ireland from 1 January to 31 August will not count towards any carbon dioxide emission targets, it should be noted that manufacturers generally do not create vehicle models or specifications for individual countries; they create products for larger geographic markets and have strategies for them. As a result, the vehicles sold in Northern Ireland so far this year will have been heavily influenced by both the domestic and the EU carbon dioxide regimes, which currently remain aligned.
I believe that the fears of both the noble Lord, Lord Berkeley, and the noble Baroness, Lady Jones, are unfounded. It is useful to note that the sales of new cars and vans in Northern Ireland represent roughly 2.2% and 1.9%, respectively, of the UK’s total market. So even if higher-emitting vehicles have been sold in Northern Ireland, we expect that there would be an incredibly minimal change to greenhouse gas emissions. The data on the number of vehicles is not currently available. I cannot remember who referred to this—I believe it was in a conversation about air quality—but it is worth noting that the regulations cover only carbon. All cars sold must comply with particulate limits, which are obviously the contributor to poor air quality.
Thinking about the administration and enforcement of the regulations, their administration will be very much as the EU procedures are currently, with the exception, of course, that manufacturers will work with the Vehicle Certification Agency, the VCA, as the enforcement body, rather than the EU equivalent. At the moment, data is passed to the DVLA, as it will be in future, then it will get to the VCA, which is the enforcement body for the regulations. Every year, it will process the registration data and calculate the carbon dioxide performance and targets for the previous year for each manufacturer.
Any manufacturer exceeding that target when the dataset is published in October has to pay an excess emissions premium and has 28 days to pay or appeal it. That is what happens for new cars—that is, cars at first registration—but the noble Baroness, Lady Randerson, mentioned the Volkswagen emissions issue. The regulations also allow for random verification of carbon dioxide emissions from vehicles in service. In this case, it is the DVSA that conducts random testing on new and, sometimes, used cars to ensure compliance. Also, all new vehicles are now required to store that data on board.
Many noble Lords asked me to go far beyond the regulations, and I would not want to steal the thunder of two bits of government activity which are coming very soon. We recognise that the retained carbon dioxide targets are not currently aligned with our commitments to phase out new petrol and diesel vehicles by 2030, nor, obviously, with the 2035 zero emissions at the tailpipe ambitions. We will be publishing the Green Paper on the UK’s future carbon dioxide regulatory framework very shortly. It will set out the frameworks that we could introduce to transition away from the most polluting vehicles and to support consumers and businesses to make the switch to zero emissions. The second piece of activity is the much more wide-ranging transport decarbonisation plan which will talk about how we decarbonise all modes of transport. I have listened very carefully to the questions in this area but I would not want to steal its thunder, as noble Lords will be seeing that very soon.
The noble Baroness, Lady Randerson, noted the Environment Bill. The Government intend to create a regime that will enable manufacturers to recall vehicles and non-road mobile machinery and vehicle components that do not comply with the environmental standards which they are legally required to meet. The Government will be able to set vehicle manufacturers a minimum recall level that they will have to achieve. In the event of the manufacturer refusing to comply with a recall notice or failing to meet the minimum recall level, they can be subject to civil penalties. Under these carbon dioxide regulations, manufacturers can already be issued with substantial financial penalties if they fail to meet their carbon dioxide targets. However, it should be noted that there is no upper limit on carbon dioxide for any particular vehicle. They are being set on a fleet-average basis, meaning that manufacturers can sell some vehicles which produce more emissions than average because there will be others that produce fewer.
I accept that I have not been able to go into detail on some of the questions that I have been asked today. I will be writing, particularly to provide further information around consumers and how we feel the market in Northern Ireland is behaving at the moment, but for the time being, I beg to move.