Climate change & energy

Action in the UK - Transport and climate change

Transport accounted for about 28 per cent of UK greenhouse gas emissions in 2005, almost the same as the domestic and industrial sectors on an end user basis. Carbon dioxide is the main greenhouse gas, accounting for about 84 per cent of the 'basket' of greenhouse gas emissions in 2005, and road transport is one of its major producers (22 per cent of total UK CO2 produced in 2005).

In July 2004, the Government set out its transport strategy in The Future of Transport: a network for 2030 white paper. This made clear that while good transport is central to a prosperous economy, facilitating better access and greater mobility, we must balance the increasing demand for travel against our goal of protecting the environment effectively and improving the quality of life for everyone – whether they are travelling or not.

Road transport

Looking at road transport, we have seen year on year fuel efficiency savings for passenger cars particularly since the mid 90’s. New cars sold in the UK in 2004 were on average some 10 per cent more fuel-efficient than in 1997. This is largely due to a combination of the Voluntary Agreements between the European Commission and the automotive industry; and new transport policies such as vehicle excise duty and company car tax being graduated according to CO2 emissions. Going forward, continued significant efficiency improvements are expected. We are currently working with the European Commission on the legislative proposal to set mandatory targets on vehicle manufacturers to reduce tailpipe CO2 emissions as a  successor to the current Voluntary Agreements which is likely to fall short of its ambition to achieve a new car EU sales weighted average target of 140 g/km by 2008. As such the European Commission has taken action to ensure future fuel efficiency improvements are delivered through the form of regulation. Following an EC Communication on CO2 from cars published in February 2007, the Commission issued a draft legislative proposal on 19 December 2007. 

The draft proposal has as its core a sales weighted average target of 130 g CO2/km to be delivered by 2012 from fuel efficiency alone. However, the proposal  also requires additional 10 g CO2/km coming from other measures e.g. more efficient air conditioning, low rolling resistance tyres etc. (a further proposal from the Commission setting out the details on how the remaining 10 g/km will be delivered should follow later this year). The details over the structure and delivery mechanism of the regulation will be debated within European Commission working groups and within the European Parliament during the course of the year.  

The Government’s Powering Future Vehicles Strategy, published in July 2002, sets out our aspiration that the UK should lead the global shift to the low-carbon transport economy, building competitive advantage for our automotive industries.

The Strategy set a number of targets, including the key target that by 2012 10 per cent of all new car sales in the UK will be of “low carbon” vehicles, defined as those with tailpipe emissions of 100 g/km in CO2 or less. It also appointed the Low Carbon Vehicle Partnership (LowCVP) to play a key role in helping Government to deliver on the Strategy. LowCVP is an action and advisory group, established in 2003 to take a lead in accelerating the shift to low carbon vehicles and fuels in the UK and to help ensure that UK business can benefit from that shift.

To achieve the kind of fuel efficiency improvement outlined above will require considerable innovation. In May 2007 the Government published a Low Carbon Transport Innovation Strategy which assesses where Government intervention can be most usefully focussed and setting out a wide range of actions Government is taking to encourage innovation and technology development in lower carbon transport technologies. Industry already spends a great deal on Research and Development and a key role for Government is therefore to stimulate investment in a carbon R&D activities, including nearer and further from market options.

The Government continues to employ fiscal measures to incentivise consumers to choose more fuel efficient vehicles by linking the amount owed to the amount of CO2 a vehicle produces.  For example:

  • fuel duty is a tax on vehicle use, sending a clear environmental signal to motorists that driving less fuel efficient vehicles will be more expensive;
  • in 2002, Company Car Tax was reformed to make it carbon-based; and
  • Vehicle Excise Duty (VED) was reformed so that from March 2001 it became graduated by carbon emissions. Budget 2006 reduced vehicle excise duty for the lowest emission cars (up to 100 g CO2/km) to zero.

Budget 2008 announced that the Government will take further steps to promote environmentally efficient business travel and the take up of cleaner cars through:

  • increasing fuel duty by 2 pence per litre on 1 October 2008, by 1.84 pence per litre on 1 April 2009 (as announced at Budget 2007), and by 0.5 pence per litre above indexation on 1 April 2010.
  • reforming the Vehicle Excise Duty (VED) structure. From 2009, VED will be restructured with 5 new bands (13 in total as opposed to current 6 bands) based on carbon dioxide so that people win financially by choosing the car with the best environmental performance within a given group. Moreover from 2010, there will be a new higher first year rate based on carbon dioxide emissions to influence upfront choices when people buy cars;
  • announcing company car tax rates for 2010-11, increasing rates on all but the cleanest cars emitting 135g CO2/km or less;
  • replacing the existing capital allowance treatment for business cars with an emissions based approach. Cars will be placed in one of two capital allowance pools according to their CO2 emissions, with cars whose emissions are above 160g/km receiving a lower allowance. 100% first year allowances will continue to be available for cars with CO2 emissions not exceeding 100g/km;
  • enhancing the incentive to drive fewer miles by increasing the fuel benefit charge at least in line with indexation from April 2009;
  • offering a lower VED rate for diesel vans that comply with EU air-quality emissions standards.

As announced by budget 2007 Professor Julia King and Sir Nicholas Stern have led a review to examine the vehicle and fuel technologies which over the next 25 years could help decarbonise road transport. Part I of the King Review of low carbon cars, published alongside pre-Budget Report in October 2007, analysed and set out the important issues for decarbonising road transport in the UK. It focused on cars and vans.  Part II of the King Review, published around Budget 2008, proposed specific policy recommendations. The Government is currently working on the official response to the Review to be published in the summer.

Fuel efficiency labels

A key development in the promotion of more fuel efficient vehicles has come from the introduction of a new form of fuel efficiency labels. The new labels, similar to those currently displayed on fridges and other white goods, were developed by the Low Carbon Vehicle Partnership (LowCVP) in the effort to help deliver information to car buyers on how they can save money and help the environment. All car brands selling vehicles in the UK have signed up to the introduction of the voluntary labelling scheme. Since 1 September 2005 the label should now feature in all car showrooms across the UK. As well as highlighting the fuel efficiency of every new car on sale, the labels also contain information on how much motorists can expect to pay in fuel bills in a typical year for a particular car, and whether the car qualifies for a reduction in Vehicle Excise Duty. We are also awaiting a legislative proposal from the European Commission which is likely to propose a mandatory system of colour coded fuel-efficiency labelling across the EU.

Biofuels

Biofuels are potentially another way of delivering carbon savings from road transport. Biofuels are a relatively expensive way to reduce carbon dioxide emissions compared, for example, to savings from energy efficiency. However, they could be one of the more cost effective ways of delivering carbon savings from the transport sector, particularly if we consider the wider benefits that they might provide and the potential for further improvements in the long-term. On 10 November 2005 Transport Secretary Alistair Darling announced new measures to make transport fuels greener by requiring 5% of all UK fuel sold on UK forecourts to come from a renewable source by 2010. The Renewable Transport Fuel Obligation will be introduced in 2008-09.  This measure will ensure a cost effective transition to a renewably fuelled transport system over the long term, saving around 1 million tonnes of carbon emissions a year by 2010,  equivalent to taking 1 million cars from our roads. Carbon savings could increase in future years, depending on how the level of obligation changes. This will help reduce the impact of transport on climate change, and increase the United Kingdom's fuel security and diversity of supply. To ensure that biofuels are sourced sustainably, obligated companies will be required to report on the level of carbon savings achieved and on the sustainability of their supplies.

Road transport and emissions trading

The UK Climate Change Programme 2006 committed the Government to consider possible inclusion of surface transport into the EU Emissions Trading Scheme or as a UK self-standing measure. This was followed by a commitment in the Energy Review Report to engage with key organisations, the European Commission and other EU Member States to ensure that the potential for future inclusion of emissions from surface transport in the EU ETS is given serious consideration.

The Government has, therefore, been examining the scope for including surface transport in CO2 emissions trading mechanisms. This could be a cost effective means of delivering significant carbon savings. Emissions trading  could be done in different ways. One approach would be to require fuel producers to hold carbon allowances to cover the total amount of CO2 emissions resulting from the fuel they sell. Emissions trading could also cover vehicle manufacturers with allowances depending on the fuel efficiency of cars they sell. Finally, the scheme could involve private motorists and hauliers. They would be required to surrender sufficient allowances when buying fuel to cover the emissions they would subsequently produce.

The benefits in terms of carbon savings would be highly dependent on a number of assumptions, not least the number of allowances allocated to the transport sector. The tighter the cap in allowances allocated to the transport sector, the greater the carbon savings but also the higher the costs.

There are many issues to be addressed before a definitive view can be taken about the desirability of including surface transport in emissions trading. These issues include the route for implementation, the regulatory burden on current and future participants, whether carbon savings achieved occur within the surface transport sector itself, the impact on carbon prices and the impact on UK competitiveness. Emissions trading is only one of a number of tools to reduce transport emissions, and is therefore being considered as a complementary measure rather than in isolation or in place of other measures.

The European Commission also considers that further cost-benefit analysis is required before determining whether trading is the most appropriate mechanism for addressing carbon emissions from road transport, and has informally ruled out inclusion of surface transport from the start of Phase III.

The Government’s recent transport strategy 'Towards a Sustainable Transport System', highlighted that the Department for Transport is currently looking at the full range of options for putting transport on to a less carbon-intensive path, and for drawing potential pathways for reducing carbon emissions for different types of journeys and transport modes, including trading.

Therefore, drawing on the work we have already carried out, we will engage with key stakeholders, the European Commission and other EU member states to help develop a robust evidence base on the costs and benefits of introducing surface transport in CO2 emissions trading at a UK level, either as preparation for EU-wide adoption or as a self-standing measure.

See Department for Transport Discussion Paper on road transport and EU emissions trading (on Department for Transport website)

Rail

Rail sector is responsible for less than 1% of all UK CO2 domestic emissions while contributing 36% of all UK CO2 transport emissions. Of those, 54% are associated with the sector’s electricity use, with the remaining 46% from diesel fuel consumption.

Generally, rail is a relatively carbon-efficient form of transport as with sufficient loadings the greenhouse gas emissions per passenger kilometre can be lower than both air and car. Therefore, rail’s biggest contribution to tackling global warming in the short-term comes from increasing its capacity, so that it can accommodate demand-growth as people and firms factor carbon-costs into their travel and transport decisions.

Despite its relatively good performance rail must also reduce its own carbon footprint. Next year the industry will set itself targets for reducing CO2 emissions per passenger-kilometre and per tonne-kilometre. The Government will encourage progress by funding research and writing environmental objectives into passenger franchises.

Aviation

The EU Emissions Trading Scheme pages cover the Government's approach to the inclusion of aviation in the EU ETS.

Encouraging a move towards more environmentally friendly means of transport

According to The Stern  Review another important dimension to the policy framework required to reduce emissions is to enable people to adopt low carbon behaviours. Engagement of consumers is crucial to achieve CO­2 reductions from road transport. They can do this by: demanding new technologies (through their purchase decisions); using more efficient driving techniques; reducing use of cars by using public transport, car sharing, walking or cycling. Therefore, the Government has put in place a substantial programme to promote change of travel behaviour using a range of measures called ‘Smarter Choices’. These include workplace, school and personalised travel planning, travel awareness campaigns and marketing and offer great potential to reduce congestion and carbon emissions.

The Government also launched the ACT ON CO2 campaign in March 2007 to encourage consumers to reduce their CO2 emissions by driving in a 'smarter' more fuel efficient manner and to purchase a more fuel efficient vehicle. The campaign consists of television, radio, online, outdoor and print media advertising encouraging people to visit the website to get tips on driving techniques and the Best On CO2 rankings showing the top ten cleanest cars in their class.

As highlighted in the Energy Review report the Government recognises the important role public transport has to play in reducing emissions. Therefore, we are putting record investment into public transport to improve reliability and to give people a real alternative to travelling by car.

As part of this commitment, local and central Government are now spending over £2.5 billion a year to provide bus services. Additionally, in December 2006 the Government published proposals for a modernised national framework for bus services, in Putting Passengers First document.

A good railway network plays a similar role in cutting congestion and carbon dioxide emissions. The UK now has the fastest growing railway in Europe and we expect it to continue to grow. The average person travelling by rail produces around half the carbon dioxide emissions of the average person travelling by car. The Government will consider how new technologies can improve energy efficiency and reduce fuel consumption to get even more environmental benefits from rail.

Department for Transport

The Department for Transport (DfT) is the lead department for UK’s domestic transport policies. See www.dft.gov.uk

Page last modified: 28 April 2008
Page published: 01 December, 2005

Department for Environment, Food and Rural Affairs