Back in October 2023, when Sir Keir Starmer was planning to put the adults back in charge, or whatever it was he said, maybe it was the Teletubbies, the ZEV Mandate die was cast by the Tories. Its implementation was supported by a cost: benefit analysis, which of course came out in support of the policy. When I say “of course” I mean that the government was always going to find a benefit to a policy they wanted to implement. If the costs outweighed the benefit, they would have just asked a different analyst to have a crack at the numbers (see: smart meter cost: benefit analysis).

My interest in going back to this document, which I had not read (there just is too much vacuous propaganda for any sceptic to keep abreast of) was that it is by now quite obvious that the ZEV mandate’s very pips are squeaking. The present collapse of the mandate is evidence that the cost: benefit analysis must have been wanting, or so it seemed to me. So I thought I’d have a delve, and see just how outrageously tilted the table had been.

The background to the proposed ZEV mandate was the necessity for drastic CO₂ cuts, as set by the upcoming Carbon Budgets, themselves a consequence of the technocrat’s all-time favourite underwear, the “legally-binding” requirement to reach Net Zero by 2050. (If you remember my earlier piece on the ZEV mandate, you’ll recall that the original purpose of the ban on ICEs was to rid the air of NOx – it had nothing whatsoever to do with carbon dioxide. That came later. But it is now the driving force.) Greenhouse gases, says the analysis, are an externality leading to market failure, necessitating government intervention. The GHGs have a cost that affects wider society. [To the sceptic, a trivial sum that does not warrant this hell of regulation.]

The headline result is:

The policy is expected to achieve non-traded emissions savings of 28, 77 and 411 MtCO₂e in carbon budgets 5, 6, and 2024-2050, respectively. It offers high value for money, with a best estimate social Net Present Value of £39bn, as well as supporting growth and employment in the low-carbon economy. This estimate rises to £116bn if no growth in traffic levels is assumed to result from the regulations.

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So the top benefit is CO₂ savings. The second benefit is a Net Present Value of £39bn, and the third is green jobs. The NPV is greatly inflated – tripled – if there is no growth in traffic.

Now that’s a curious thing on its own. If you asked me to make a list of pros and cons of the ZEV mandate, I would probably do a bad job; I’d give you a list of the pros and cons of EVs, which is not the same thing. But here, the government is (was in October 2023) saying that it expects the ZEV mandate to drive up traffic levels – with an associated cost to the tune of £80bn.

The summary table gives the best estimate of total costs, up to 2071, of £127bn.
The total benefits are £166bn.
Take one from the other and you have your £39bn net.

Here are the monetised costs making up the headline figure:

• Capital – marginal cost – vehicles £27bn
• Capital – marginal cost – infrastructure £11bn
• Opex – operating and maintaining the network £2bn
• Costs of greater road usage – congestion £78bn
• Costs of greater road usage – accidents £7bn
• Increased [traded] emissions £2bn

By far the largest is the problem of increased road congestion! More on that anon. Meanwhile, here are the main benefits adding up to £166bn:

• Social benefits of [non-traded] emission cuts £103bn
• Reduced running costs, for households, fuel £39bn
• Reduced running costs, for households, maintenance £15bn
• Indirect tax benefit £6bn
• Air quality improvement £1bn
• Consumer surplus benefits £2bn

I’ll explain what the less-obvious items mean, once I find out myself.

Further non-monetised costs noted are the “indirect costs to downstream businesses (e.g. car dealers).” Any extra emissions in the production phase (EVs have higher carbon footprints in manufacture) are not quantified in the document. Probably a serious lacuna.

Non-quantified benefits are employment impacts, including in ZEV manufacturing (!) and the chargepoint network, and any upstream emission savings from reduced fuel production.

You may wonder how the figure of £103bn of benefits from emissions cuts is arrived at. All I will do here is quote paragraph 2.18:

DESNZ (the department for Energy Security and Net Zero) produces estimates of the societal value of carbon. This value sits at a cost of around £245 per tonne of carbon equivalent emitted in 2021 (in 2020 prices), reflecting a rough scale of the external cost of greenhouse gases borne by society due to CO₂e emitted by today’s cars and vans.

The next paragraph also has an interesting snippet:

In 2020, using DESNZ carbon values, the carbon externalities on petrol fuel consumption are estimated at ~50 pence per litre meanwhile fuel duty is set at 59 pence per litre. However, there are many other significant externalities of fuel consumption such as air quality, congestion, accidents, road wear and tear which DESNZ carbon valuations do not include.

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Paragraph 2.32 notes what everyone knows – that PHEVs are just a way for manufacturers to avoid the necessity of trying to sell EVs:

The difference between the test cycle and real-world performance has been especially dramatic for Plug-in Hybrid Electric Vehicles (PHEVs) – where the latest evidence indicates that the real-world gap can be up to 5 times higher than the performance measured at the test cycle for company cars and up to 3 times for private cars.

The reason, of course, is that the test cycle relies on the vehicle being plugged in quite a bit, whereas the real-world usage only ever involves a fuel pump. This leads to the obvious corollary, which is that if you want to reduce CO₂ emissions from transport – you’re wasting your time with PHEVs, and have to go all-in on BEVs.

Evidence obtained from the manufacturers – via announcements made by September 2023, the month before the cost: benefit analysis – was that 67% of car sales in 2030 would have been BEVs anyway, though the document admits that ICE bans were already on the cards by then, so this was not all consumer, or even producer, led. This bit is quite hilariously dim:

While the industry scales up its ZEV production capacity, failure to legislate levels of ZEV supply risks the diversion of the supply of ZEVs away to other markets, leaving the UK behind in the global transition.

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O woe! Some other saps might buy the ZEVs.

Next, the document admits that currently, ZEVs, or BEVs, as the rest of us call them, are more expensive to produce than ICEVs. So the market needs a prod. Probably electrified.

The baseline, I should add, does not involve cancelling any climate-related car targets. It involves a steady increase in BEV sales, without the mandate and associated penalties: the DfT thinks that by 2030, 42% of cars would be BEVs. [Yes, this is lower than what they thought the manufacturers were going to deliver.] Personally, I think they’ll be lucky if they hit 42% with the mandate, let alone without it. But let me just hurry along to “Impacts,” because this is a long document, and none of us want to waste our life trapped in it as the walls come in.

The analysis separates “direct” impacts from “indirect.” The latter results from behavioural change:

For instance, the transition to electric vehicles may result in additional traffic caused by the lower per mile cost of driving electric vehicles.

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One cost that is dear to Cliscep’s heart, but has not been monetised here, is:

The cost of road wear and tear due to heavier vehicles on the road (electric vehicles could become heavier due to battery sizes) and additional induced driving demand.

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Nor, as noted, are additional emissions associated with manufacturing, or recycling, included.

Now we get to find out what those mysterious benefits were all about. The £2bn of “consumer surplus” benefit is:

Additional benefit of the increased demand trips taken because ZEVs are cheaper to run than alternatives.

I think we’re going to have more fun, because we dare to drive more, now that it’s cheap. The “indirect tax” benefit of £6bn is:

Additional benefit of increased tax revenue from additional ZEV trips.

We are going to pay more tax, thanks to the extra trips, which will benefit society at large, to the tune of £6bn, over 50 years.

Next, the un-monetised benefits are laid out, and here there is an additional one not mentioned in the summary:

Reduction in time required to refuel/recharge vehicles.

Society as a whole is going to benefit from the ZEV mandate, because we will spend less time fuelling our vehicles. I’m serious! Don’t start throwing rotten tomatoes at the screen. This is perfectly rational, if you’ll only don your green-tinted shades for a picosecond: people are going to charge overnight, and not squander those 6.5 minutes they used to spend once a week on the forecourt. If they ever need to partake of the chargepoint network, why, then they’ll time it to coincide with lunch, or a business meeting.

It all makes sense, especially if you are too forgetful to remember just what the UK used to be like.

(Yes. I know. That is a sword that cuts twice, or maybe a double-handed flail.)

We’ve reached the Summary of the Impacts, which begins by laying out the “carbon” savings (CO₂, i.e.). These are, in fact, fairly trivial at the start, thanks to the overenthusiastic baseline. It’s 28 MtCO₂e saved between 2027 and 2032 (i.e. in Carbon Budget 5). The present emissions of the UK are, what, about 4 tonnes per person, CO₂, per year, times 70 million, or 280 million tonnes per year. So the ZEV mandate saves 28/5 Mt per year, or about 5.5 Mt out of 280 Mt, or 2.5%.

This analysis suggests that, on average, BEV owners are expected to realise net disposable income gains as a result of switching to BEVs. These savings are expected to grow over time as capital costs are expected to fall and are expected to be even greater for those purchasing BEVs on the second-hand market.

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I’ll leave it to you, to decide whether or not you believe that makes sense.

The switch to BEVs, ceteris paribus, is going to lead to lower tax take by HM Treasury. That’s because of how knuckle-chewingly stupid the present fuel duty / VAT regime is. For vans and cars, the estimate is of a drop of c. £4bn by 2035. It doesn’t count in the cost: benefit analysis, as I understand it, because it is a transfer.

The switch to ZEVs is assumed to lead to increased mileage per ZEV driver, because electric fuel is cheaper than petrol and diesel.

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Are you quite absolutely sure on that point?

Drivers incur several different types of operating costs, such as repairs, servicing, and tyre replacements. These vary between vehicle types and drive trains. It is expected that ZEVs will have lower maintenance costs as they are simpler in design and have fewer moving parts.

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Are you quite absolutely sure on that point, too?

An uptake in ZEV policies is expected to have net co-benefits of cleaner air and associated wider economic benefits. ZEVs almost exclusively have no exhaust emissions of particulate matter (PM) or NOx, which are emitted by petrol and diesel engines and which contribute to poor air quality. Differences in air quality impacts stemming from non-exhaust PM are more complex, uncertain, and mixed.

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Sure. They just so happen to lean quite hard against EVs. But you don’t want to know about that, so you aren’t including it here.

Overall, drivers are expected to realise greater disposable income as a result of investing in ZEVs, in addition to expanded driving options, due to the lower cost of transport.

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The increase in ZEV uptake is likely to lead to differences in households’ and businesses’ refuelling behaviour. This is expected to lead to changes in the time required to refuel vehicles, and have subsequent utility impacts for households and cost impacts for businesses. In the consultation analysis, we presented high-level analysis on whether we expected these impacts to be costs or benefits. The analysis concluded that there would be overall benefits, as the vast majority of charging activity would take place while other activities are undertaken, such as overnight or during a shopping trip.

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You see! I told you not to tomato the screen.

I’ve reached Table 56 of my Everest, wherein it says that the Low Net Present Value is -£40bn, the central estimate is +£39bn, and the high, on what chemical we don’t know, estimate is +£176bn. There’s also a “highest” NPV, a shade higher at +£183bn. That makes me think of the clockwork baby crawling across the ceiling in Trainspotting. This is almost the end of “impacts”, and I was about to sign of with a cheery wave and a heel kick, when I found paragraph 3.141:

Thirdly, the capital cost estimates applied in the central scenario are significantly less optimistic than those published by stakeholders with a range of backgrounds, including the Climate Change Committee, Bloomberg New Energy Finance, and the International Council on Clean Transportation. The downside cost sensitivity is significantly less optimistic than the central scenario, which itself may be viewed by many experts as pessimistic. This may suggest that this outcome is less likely to occur, again reducing the probability of a negative social NPV.

OR: how about this, bozos, you actually ask someone who disagrees with your mad scheme for their considered opinion about its value?

Having reached Section 4: Policy Risks, I was really, definitely, finally going to call it a night. But then I read one more thing that could not be left gainsaid, or at least, cut into an already overly-long blog note.

On the other hand, if consumers attempted to extend the life of their vehicles, this could raise the average age of non-ZEVs in the fleet and increase average emissions compared to the central scenario.

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Well, I hope we do that. I really do.

/message ends