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UK study finds low carbon policy has bolstered UK automotive sector, but trucks neglected and biofuels stalled

Value of low carbon investments by year and cumulative. Click to enlarge.

A major new report published at the Low Carbon Vehicle Partnership’s Annual Conference shows the UK automotive sector has been revitalized by consistently applied policy centered on cutting carbon.

Carried out for LowCVP by E4tech and the Centre for Automotive Industry Research at Cardiff Business School, the study was conducted between March and June 2014. The broad industry survey, supplemented by in-depth interviews with senior executives showed that a consistent and sustained policy approach can produce both green results and growth. The link between consistently applied policy and a win-win in terms of investment and emissions performance was validated by the survey involving more than 120 senior industry and stakeholder respondents.

However, the report also found that while the UK has made a good start on the road to decarbonizing its road transport sector, the truck sector has been neglected and the fuels policy has been problematic.

Truck sector respondents pointed to the dearth of policy to support low carbon truck deployment, despite incentives to develop technologies. They also cited the tension between technologies and engineering resources required for CO2 reduction, and those to meet stringent air quality emission regulations (most recently Euro VI).

The study also examined policy on low carbon fuels, where changes in direction and the complexity of fuel and infrastructure investments in general have provided a less stable investment climate for the companies concerned. This is felt particularly strongly in biofuels where investments have stalled to a large extent.

—“Investing in the low carbon journey”

UK investments in the low carbon automotive sector have amounted to about £40 billion (US$69 billion) since 2003, a figure which matches increases in the turnover of the sector, also accompanied by a 10% increase in UK exports from the sector over the last 10 years.

In the early 2000s, the UK car industry was in a state of decline. Factory closures were commonplace, innovation was minimal, and the supply chain had become hollowed out. Environmental regulations were seen as a threat in some quarters.

This started to change with the establishment of a more active, collaborative industrial policy driven by the need to cut carbon emissions from the sector and protect against climate change.

The study sought to establish if there has been a causal link between policies that favor low carbon vehicles and the rising levels of UK automotive investment which have been observed. Evidence was gathered via a broad industry survey, supported by interviews with senior executives, and extensive desk research. Together these provided a rich evidence base from which several clear messages emerged.

More than 100 responses were received to the call for evidence which was supported by the SMMT and other stakeholders collaborating in the study.

Other findings of the report include:

  • Over the last decade, unprecedented and sustained reductions in carbon emissions (tailpipe emissions down by a quarter) have coincided with rising investment in the UK automotive sector. Fuel costs for motorists are also lower than they would otherwise have been due to improved efficiency—a “win-win-win” for the environment, industry and consumers.

  • A clear policy focus (backed by the Stern Review and the Climate Change Act, amongst others) combined with a suite of supportive and sustained policy mechanisms (across and between governments) have created a favorable environment for low carbon auto investment in UK.

  • UK automotive production and exports are rising and there is a recent strong revival in R&D spending. UK auto sector turnover was £64.1 billion (US$110 billion) in 2013 compared with £46.3 billion (US$79 billion) in 2003.

  • Exports as a proportion of UK car production are up 10% compared with a decade ago.

  • European Cars and CO2 regulation has underpinned progress; a vital component in creating a level playing field for investors.

  • Findings point to the effectiveness of collaborative approach between government, industry and other stakeholders which has created a climate of confidence for investment the auto industry.

  • Policy changes have helped to produce a healthy UK bus and coach sector with nine manufacturers and a total UK market of 3,685 units in 2013.

  • Work on the supply chain, the skills base and air quality improvements must also be supported in order to create industrial depth and resilience for the long term.

The report authors made a number of recommendations for policymakers based on the evidence and their own judgement. The recommendations fall into three broad categories:

  • Stay on course. Automotive policy frameworks are mostly working well, in particular due to the sense of urgency as well as consistency of policy, which should not be allowed to diminish. Although There are other priorities, low carbon must remain a vital area of focus. Strong emphasis should be placed on the transition from low carbon technology development to manufacturing.

  • Address remaining automotive sector challenges. This includes attracting further inward investment, especially from component suppliers, to increase UK resilience. The report authors emphasized the need for the alignment of low carbon policies with air quality issues. Further, because EU regulations play a key role in harmonizing future vehicle CO2 (and air quality) performance requirements, UK companies are keen to see the UK influencing this agenda. In addition, a clear framework is required for commercial vehicle efficiency measurement and incentives.

  • Low carbon fuels. A collaborative approach is needed to define the outlook for automotive fuels. Low carbon fuels, in particular biofuels, currently do not benefit from the same clarity of outlook that automotive players enjoy due to the Automotive Council and LowCVP roadmaps. A partnership between government and stakeholders, ideally with an EU perspective, to define the long term outlook for fuels would be valued by the fuels and vehicles industries. This should build on the recently published LowCVP Fuels Roadmap.

This report identifies many things that have gone right, as well as some that have gone wrong. However, it is not a manifesto for complacency as the journey has really only just begun. The challenges of decarbonizing road transport are enormous, especially as the UK seeks to capture a growing share of the industrial opportunities that this presents. Much work is still required to develop low carbon vehicles, fuels and technologies, and especially to manufacture them in the UK and deliver them to market. Government and industry, along with other stakeholders, through collaboration have made an important start on the journey. Continuing dialogue, support and action is required to ensure that UK industry can deliver upon future targets and build both a vibrant and sustainable industry and vehicle fleet.

—“Investing in the low carbon journey”



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