Vehicle Emissions Trading Schemes Order 2023

Debate between Lord Lilley and Baroness Randerson

Monday 27th November 2023 Lords Chamber

[Lord Lilley (Con)]

My Lords, like the noble Baroness, I too am a member of the Environment and Climate Change Committee doing a study of this. Unfortunately, I was unable to benefit from the huge wisdom of young people at the school she attended. Had I been there, I would have mentioned that, since we export over 80% of the cars produced in this country, the mandate for sales in this country and the phase-out date has very little effect on British manufacturers. They have to abide by the rules in their export markets. Meanwhile, 85% of the cars we consume are produced abroad.

I want to ask the Minister whether I understand properly how this system will work. Take a year when we are half way through, when the zero-emissions mandate requires any manufacturer’s sales to be at least 50% electric vehicles and no more than 50% combustion engines. Supposing that a manufacturer finds, in the course of a year, that his sales of electric vehicles fall short and the ratio turns out to be 40:60, am I correct that the manufacturer will have to pay a £15,000 fine on all 20 extra vehicles—the difference between 40 and 60—per 100 that are combustion engine? If so, my arithmetic shows that he will effectively have a penalty of £5,000 for every combustion-engine vehicle he has sold. That is a very serious penalty. I do not think people realise quite how serious it is. I am not sure whether the Government have thought through the reaction there would be from motorists if that turns out to be the case, especially as the people who tend to buy combustion-engine vehicles rather than electric vehicles are those who cannot afford expensive vehicles—because electric vehicles tend to be more expensive. They would find themselves paying that fine on usually cheaper, smaller vehicles—to the benefit of the richer purchasers of larger, more expensive, electric vehicles. Am I correct that this is how the system works?

The Minister may say that if manufacturers have excess sales of electric vehicles from previous years they can offset those, and can go out and buy permits from other manufacturers that are, perhaps, only selling electric vehicles. Who will be the manufacturers only selling electric vehicles? They will, by and large, be Chinese manufacturers exporting their vehicles to us. A manufacturer producing only electric vehicles and importing them into this country from China will be able to sell its permits on 50% of the vehicles it sells. It can get £15,000 for each of them and enjoy a subsidy equivalent to £7,500 for every vehicle it sells. Whizzo for the Chinese manufacturers—that far exceeds the effect of the 10% tariff they will have to pay on the vehicles. Am I correct too that we have invented a system that could really subsidise the import of Chinese electric vehicles?

Then I want to ask whether this will all be worth while. If it will reduce emissions, of which I am all in favour, then great. Questions have been raised about the inbuilt emissions of electric vehicles, which are heavier and more expensive than vehicles with internal combustion engines. I do not want to deal with that point. I want to deal with the fact that electric vehicles save emissions only if they use electricity produced from renewables or non-fossil fuel sources. More than 40% of the electricity we produced in this country last year came from fossil fuels. More importantly, 100% of the marginal electricity comes from fossil fuels. If we increase the demand for electricity by switching from fossil fuel powered cars to electric powered cars, the marginal electricity supplied to them will come entirely from fossil fuels, because you can increase the supply of electricity only from fossil fuels. You cannot summon the sun or hail up extra wind but you can increase the supply of electricity from gas-fuelled power plants. We probably will not actually reduce emissions until we have made all our electricity and have spare capacity from renewables or non-fossil fuel power sources. That is not planned to be achieved until 2035, which makes the phase-out date actually have some logic—at least it ties in with something else.

My noble friend the Minister read out a figure about the expected emissions savings. Does that assume that only 40% of the electricity will come from CO₂-producing fossil fuels or that 100% of it will? I suspect it is the former, whereas logically it could be the latter. I do not propose to divide the House on this issue, and I rather suspect I would not win if I did, but we should have honest answers to serious questions and not treat this whole issue as if it is a matter of virtue signalling.

[Baroness Randerson (LD)]

My Lords, I will leave it to the Minister to respond to those points. I am confident that he will be able to satisfy the noble Lord, Lord Lilley, but I cannot resist pointing out that it is a case not of summoning up more sun or wind but of capturing more sun and wind through solar panels and wind energy.

[Lord Lilley (Con)]

Sorry, can I explain that to the noble Baroness? I am very grateful to her for giving way. At present, we use 100% of the electricity generated by wind or sun and it still provides less than 60% of the electricity, so if we increased the demand we would have to persuade the sun to shine at night or the wind to blow on calm days to create extra electricity from them now.

[Baroness Randerson (LD)]

Of course that is not the only option. The other option is to build more solar panels and more wind farms, and I am delighted to see that there is a gradual rolling out of those facilities across the country. The noble Lord is entirely right that as we build more we will use it all, as we should.

I have no doubt about the need for this legislation, because the UK transport sector is responsible for the largest share of domestic greenhouse gas production and has seen relatively little reduction in the amount it produces since 1990, in contrast with other sectors. Cars and vans alone create 18% of the UK’s total domestic greenhouse gas emissions. There are also, of course, strong health reasons to support this legislation, because air pollution in particularly densely trafficked areas is a cause of lung and heart disease, and even has links to dementia.

So the Government’s recent U-turn on their rhetoric about the date for phasing out the combustion engine was at least confusing and at worst reprehensible, because it has slowed down the transition to zero-emission vehicles and has had a negative impact on manufacturers and their investment. They have told me about their concern. The problem is that the media have obediently repeated that change in rhetoric and it has caused confusion.