Government aligned think tank encourages a change in Electric Vehicle policy
A new publication by the Policy Exchange think tank advocates that the UK should follow the approach of several states in the US, and introduce a zero-emission credits scheme to encourage wider adoption of electric vehicles. Without a change in emphasis away from government subsidy, Policy Exchange believes the speed of change and the money needed to fund the move to electric vehicles (EVs) will mean the target of 100% sales of zero-emission vehicles by 2035 will be very difficult to achieve.
What is Policy Exchange?
The Economist describes Policy Exchange as, “a centre-right think tank whose alumni…are scattered throughout the government.” The paper, titled Route ’35, has an introduction by the current Secretary of State for Transport, Grant Schapps. He comments, “I applaud the ambition in this new paper from Policy Exchange. It proposes a plan for turning ambition into reality, with policies that could be implemented in the short term.”
What is a Zero Emission Vehicle Mandate Scheme?
In the 1990s California, along with nine other US states, introduced a zero-emission vehicle mandate (ZEV mandate). Two Canadian provinces and China have followed suit with ZEV mandates of their own. The broad principle of ZEV mandates is that it encourages the sale of electric vehicles through the build-up of credits by carmakers which they obtain from selling zero-emission cars and vans. Under the scheme, the highest number of credits is secured by selling long-range electric vehicles, with a decreasing number of credits gained from selling shorter range and then plug-in hybrids. The carmaker will face fines if it doesn’t meet its target or can sell its credits to other carmakers if it exceeds its target. In 2019 2.4% of Tesla’s earnings came from the sale of credits. In the second quarter of 2020, it earned $428m through the sale of credits to other car manufacturers.
How to get mass adoption of Electric Vehicles
Along with the introduction of a ZEV mandate scheme, Policy Exchange advocates the development of complementary policies to free up government spending on the charging infrastructure. To do this, they suggest phasing out the existing plug-in car grant and the favourable company car tax incentives for ZEVs.
The scale of the challenge to get to 100% sales of electric cars and vans by 2035 is considerable. In 2019 only 3.5% of new cars sold were ZEVs. To reach the 2035 target the sales of ZEVs will have to increase by 6% each year. A change in policy and emphasis will be necessary if this scale of increase is to become a reality.
For Policy Exchange - a think tank closely aligned with government thinking - leaving the EU allows the UK to try a new policy such as the ZEV mandate scheme. It believes that the credit scheme will encourage carmakers to push sales of ZEVs over fossil fuel cars, and subsequently, they will become a cheaper alternative. By freeing up the money that would be spent on subsidising the purchase of ZEVs, the government can work towards a charging infrastructure that would mean the adoption of electric vehicles is more straightforward as well as cheaper. It remains to be seen whether the market, with some government-mandated encouragement, will be enough to ensure we are all buying ZEVs in 2035. The Policy Exchange paper provides an alternative course of action to the current scheme of encouraging change through subsidy.