Under currently proposed climate change legislation the UK will be committing to a 60 percent reduction in total C02 emissions by 2050, and Scotland will be committing to an even higher target. This is a major challenge that will require almost total decarbonisation of the road transport sector.

The King Review of Low-Carbon Cars commissioned by the UK Chancellor concluded that almost complete de-carbonisation of road transport could be possible by 2050, with electric vehicles having a large part to play. Major technological improvements would however be required in battery and fuel cells, as well as de-carbonisation of electricity generation. Clarity and development of legislation will also be needed if use of electricity as a transport fuel is to be encouraged.

Tailpipe emissions from wholly electric vehicles would be non-existent, while emissions from upstream fuel production would become the focus. Electricity produced from any primary energy source, particularly renewables, is likely to offer significant CO2 savings compared with petrol and diesel.

There is a risk that current policies in the UK and Europe are focusing on biofuels and not enough is being done to drive development of other alternatives, such as electricity. The UK's Renewable Transport Fuel Obligation (RTFO) is arguably only a mandate for biofuels. Although in principle any completely renewably produced fuel could qualify, this would be difficult for electricity, as it would need to be shown that it was completely renewable. However this could, in theory, be done through tracking of Renewable Energy Guarantee of Origin (REGO) certificates.

To provide a more level playing field for all competing fuels, the RTFO could be reformed to focus on reducing the carbon-intensity of fuels. If carbon-intensity took account of drive train efficiency as well as carbon emissions per unit of energy in the fuel, then electric motors could come out ahead of combustion engines and biofuels.

Such a scheme could be enforced through tradable credits, where fuels that have lower carbon intensity than the target generate credits that can be sold to producers of fuels that are above the target. Fuel suppliers would be able to purchase credits generated by others if this was cheaper than reducing their own emissions. This would allow the carbon-intensity of fuels to be reduced at least cost.

Electricity companies could opt into such a scheme and would probably do so if electricity from most sources was likely to be lower CO2 than the target and would therefore earn them credits. This could be an important step in getting power companies engaged in providing electricity as a transport fuel – particularly in providing complementary infrastructure such as fast charging points and smart metering.

The EU Emissions Trading Scheme (EU ETS) is the EU’s principal tool for achieving its 20 percent CO2 reduction target. The EU ETS currently covers energy intensive industries such as electricity generation, iron and cement and oil refineries. The EU is considering expanding the scheme to more sectors including, potentially, road transport.

Developments in electric vehicles could make it increasingly difficult to separate the road transport and power sectors. Therefore, having a single scheme to regulate both sectors may become increasingly appropriate. Including road transport in the EU ETS would mean another fifth of the UK's CO2 emissions would be covered by the scheme.

More electric cars would mean greater electricity demand. In theory, the amount of "clean" power available to the grid should also be increasing, but it remains to be seen whether that will happen at a sufficient rate to meet current carbon caps even before any increased electricity demand from an electric vehicles surge is factored in.

If the necessary percentage of clean power was not available then generator's emissions caps under the EU ETS would be tightening against increased demand for electricity that might not be able to be met in a carbon-free way. This could lead to a greater carbon cost that might need to be passed onto the consumer through higher electricity prices. If fuel suppliers and electricity generators were both caught under the scheme, the issue could be exacerbated.

In January 2010, the UK will be introducing the Carbon Reduction Commitment (CRC). Organisations with half hourly-metered electricity consumption of 6000MWh or more per year will be caught by the scheme and will have their emissions capped. They will need to purchase emission allowances in advance to be surrendered at the end of an emissions period.

The CRC does not currently include transport emissions. It is clear that emissions from an organisation's petrol and diesel fleet would not be taken into account, but it is less clear how electricity used to charge vehicles would be viewed. A switch to electric vehicles could possibly see that organisation's electricity consumption rise to the point where its CRC liability is vastly increased, or could mean that that organisation trips the threshold into the scheme where it was previously outside.

Clarity is needed as to what is covered by each scheme and the effects needs to be carefully thought through to ensure that the most appropriate solution wins through.

Of course, electric vehicles are only part of the solution and different technologies will offer the most potential to reduce CO2 emissions in the short, medium and long term. Good policy should target CO2 reduction, rather than one method of achieving it, recognising that the most appropriate methods are likely to change over time. This will create a stable framework that will help give the best chance of finding the most efficient and cost-effective methods of reducing CO2 from transport.

07 October 2008

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