Has Boris Johnson got it right on PHEV subsidies?
Boris Johnson’s UK government took the decision to wipe out subsidies for plug-in hybrids. It’s not a move that has been welcomed by the automotive industry or the fleet sector.
Around the globe, governments and transnational organizations are regulating for lower CO2 output. So far so good.
While some sectors have proved resistant to decarbonisation, power generation is one example of success. Its move away from coal (around 95% carbon) to wind (0% with a small amount invested in the installation), solar (likewise) and natural gas (CH4) has put the sector on course to meet global CO2 reduction targets.
Passenger cars represent another sector where there has been success in decarbonisation. There’s been widespread transition to smaller-engined cars, driven by several factors, including:
- changing consumer choices
- improvements in engine efficiency
- reconfigured manufacturing platforms
- restructured private and business taxation frameworks
Decarbonisation step one has been go small under the bonnet.
Step two for the automotive sector has been a crucial decision on the direction of travel: whether to go diesel or gasoline internal combustion engine (ICE). Twenty years ago, we were all encouraged to drive diesel. Why? For the simple reason that diesels burn less fuel and so emit less CO2. Whatever else we read, diesel engines are more efficient by virtue of their higher compression ratio – go check the Otto cycle.
However, with CO2 in the exhaust pipe come other unwelcome partners – NOx and particulates, both harmful to health. These bad boys can be reduced by improving fuel quality (e.g. remove sulphur, which has been done) and by adjusting engine timings, which can be done – but not without a reduction in efficiency (and thereby an unwelcome increase in CO2). Hmmm.
Does regulatory pressure encourage cheating?
And there we find ourselves on the horns of the dilemma: the efficiency trade-off with NOx and particulates. You can’t have both unless you cheat. That’s precisely what happened with “Dieselgate”, where vehicle manufacturers set up their diesel engines to run efficiently in normal use and to run with minimum emissions when being tested. To achieve that, a cheat device is needed to intelligently switch between regular driving and testing modes - and so one was (infamously) installed. Regulated emissions or real emissions? The car chooses. The rest is history…. or is it?
So, this is history’s warning note: when regulators pressure manufacturers to reduce emissions beyond the capability of existing technology, consequences can be counter-productive. And, as they say, history repeats itself if we don’t learn its lessons.
This is the warning with PHEVs: green is the colour of both environmental virtue and of envy. Read on, to the next chapter in the decarbonisation story.
The third step in the decarbonisation of passenger vehicles has been drivetrain substitution with battery and electric motors. No doubt this is being successfully rolled out. We are all familiar with Tesla battery electric vehicles (BEV), the Nissan Leaf, Renault Zoë and so forth. There are few problems with BEVs – upfront cost is one, charging network another and range anxiety yet another - but these headaches are easing with better manufacturing economies of scale, improved battery and charger technology and growing charging network density. They will continue to ease. Indeed, some countries (look at Norway) have already reached the point at which more new BEVs are registered each year than ICE vehicles.
To bridge the gap, and to ease the switch from ICEs to BEVs, manufacturers hit on a hybrid combination: a vehicle with both ICE and battery that combined the best of both worlds – drive on the battery for short, city journeys and on the ICE for longer journeys. Further evolution produced the PHEV, the plug-in hybrid electric vehicle, which could be charged at home, making the tailpipe emissions even lower as the battery is charged from domestic power, not from the ICE. Cool, eh?
Or is it? How do you classify a PHEV in terms of tailpipe emissions? If it’s driven on its ICE only, the CO2 emissions will be high. If it’s driven on battery, emissions will be close to zero. So where is the line drawn? High or low?
PHEV emissions: all is not as it seems
Here’s the thing: recent data suggest that the regulation-specified level of battery running is much higher than occurs in practice – perhaps up to twice as much. This means the published CO2 emissions are scarcely achieved and real-world driving is throwing out twice as much CO2 as the marketing suggests. In other words, we buy the PHEV to reduce CO2, the regulators have set the official data at a level that cements this view in place, the automotive industry gladly markets PHEVs based on the “regulated” emissions numbers - and yet in reality there is no CO2 benefit to these vehicles at all. Quite the opposite, arguably, as PHEV CO2 emissions are worse because the car is carrying the weight of a battery and electric motor that it doesn’t use effectively. What would be the economic, environmental or, indeed, political logic for subsidising PHEVs in that context?
Towards sustainable growth
First, we need to recognise that a single value for CO2 for PHEVs presents a risk when set artificially low; that fleets are fooled into believing they are helping CO2 reduction when really the reverse is true. PHEVs can be low emission if, and only if, driven in the right way: the published figures work on the basis that they usually are: all data suggest that they usually aren’t.
Furthermore, we need to recognise that the real-world CO2 output of PHEVs is much higher than so far established, and that published figures should be adjusted accordingly. Or, indeed, a range of CO2 emissions should be published, and marketing claims adjusted, to better inform fleet managers and buyers.
We expect a shift. Manufacturers, franchised dealerships, OEM-captive and independent leasing, or fleet management companies have been pushing the economic, fiscal, and environmental benefits of PHEVs hard to fleet operators. That messaging, and its impact on the composition of overall B2B vehicle fleets, is going to change. And rightly so.
The current situation looks much like greenwash, and nobody wants “PHEVgate”. On this one, Boris Johnson and his government may just have got it right.