The zero emissions vehicle (ZEV) mandate requires that a certain proportion of the new cars sold in the UK are electric. There is a very similar scheme in Europe, and both were modelled on a Californian equivalent. This is a proven approach. Over time, the proportion rises, until eventually other types of car will not be allowed to be sold. The government is now consulting on changing the targets along the way.

The ZEV mandate is a work of genius.

First, it is flexible. Very flexible. If a company sells more electric vehicles (EVs) than it needs to this year, it can sell fewer next year. Second, if it sells fewer this year, it can make up the difference next year. Equally if it oversells, it can sell the credits to other firms, and if it undersells, it can buy credits. Overselling and underselling firms can bargain between themselves in a way that is economically efficient, both for them and for society. If the cheapest way to get one more EV on the road is for Tesla to sell one more, then that will happen - and they will sell the credit to someone doing less well. 

As well as EVs, very low-emission petrol cars - such as plug-in hybrids - also count, although not quite as much. These flexibilities matter: last year 20% of cars sold were EVs, below the 22% target. Thanks to the flexibilities, particularly for plug-in hybrids, the industry sold 24% “EV equivalents”, thus over-shooting the target. This in turn means that the industry does not have to hit the target this year, as they already have credit in the bank. 

Overall, the system is directive at industry level, but is not at all directive at firm levels. That encourages competition and efficiency, while still delivering the overall outcome that society wants. Firms can, and have, taken very different approaches to satisfying the mandate, ranging from Tesla’s all-EV approach to Jaguar Land Rover and Toyota’s approach of having very few EVs. 

Second, it sets a very clear set of incentives, both immediately and in the longer term. Car firms know exactly what they have to do. Equally as importantly, producers of fast chargers have a clear sense of the likely number of EVs in the future. That strengthens the case for installing chargers across the country. This really matters - EVs and fast chargers are a classic “chicken and egg” scenario. No-one wants to buy an EV unless there are lots of fast chargers (even if they mainly charge at home) and equally no-one will install chargers without knowing that there are a decent number of EVs on the road. The ZEV mandate allows both sides to be confident - and means that we do not need to subsidise the installation of chargers. This chicken and egg approach is why a quantity-based approach, such as the mandate, is inherently superior to a price-based tax and subsidy scheme. 

Of course there are winners and losers. Car firms that make obsolete designs of cars - those with high rates of CO2 emissions - will lose out. Those that are more technologically advanced - and more efficient at producing those cars - will be winners. That is a good set of incentives. We can see the old adage play out in industry lobbying: "Government may not be able to pick winners, but losers sure can pick governments”. Loser firms are lobbying the government hard to change the rules. They should be resisted. 

EVs are good for motorists, especially if they can charge at home, because EVs are cheap to run. Petrol today costs 90p a litre, before taxes and VAT, so driving a mile costs about 9p plus tax. An EV will do about four miles to a kilowatt hour. For some with a good electricity deal the cost is 2p a mile, and someone with a bad deal will pay about 6p. Electricity is fundamentally a more efficient way to power a car. Those who have to charge away from home can also pay as little as 6p per mile, if they use a Tesla charger off peak, although some other companies charge rather more. Once taxes are included, a petrol car is obviously even more expensive, although the new EV charge per mile will offset that. 

Increasing the proportion of EVs on the road is useful for the UK in many ways. First, it directly lowers our CO2 emissions, since EVs emit less CO2 at the power station than petrol and diesel cars. This effect is amplified as more people have smart EVs that charge when the price is low (aka, when wind or solar are being curtailed, which is when electricity is greenest and when patio solar becomes more common - people will literally be able to charge their car for free. Finally, this effect is even further extended through intelligent charging and vehicle-to-grid becoming the norm. Octopus is already offering free electricity to people who will leave their cars plugged in - because it can control the charging remotely, and use them as power banks to reduce the pressure on the grid.

EVs will also reduce the cost of electricity because more demand (except at peak) means that the costs of transmitting electricity will be divided between more units. That means the price of regular electricity will fall. That in turn means that (for example) heat pumps become more cost efficient vs gas, which will encourage take up. This further increases electricity demand and lowers the costs of the infrastructure - the wires etc - per kWh sold. It is a virtuous circle, whereby both EVs and heat pumps - and for that matter fridges, air fryers and even air conditioning become cheaper and cheaper to run.

EVs also reduce local pollution. We have seen big reductions in air quality issues in central London recently and bigger than expected falls in health issues. Turns out that those car fumes are really much worse for people than expected. The weight of EVs means more tyre wear, but regenerative braking means less brake wear and no exhaust is definitely a bonus - especially compared to a diesel car, or an older or less well maintained petrol car. 

Now would be a particularly odd time to materially unpick the ZEV mandate. The industry, taken as a whole, is now ahead of the curve. Formerly backward legacy firms, such as Jaguar Land Rover, are now getting their act together. Cheaper EVs are now coming on stream much more quickly - the new Renault 5, the second generation Dacia Spring, the Cupra Raval and so on. New product classes, such as seven-seaters, are increasingly covered, with new offerings from, for example, Kia and Mercedes Benz. Ranges are increasing, with real world ranges above 300 miles increasing common, and recharging speeds are getting swifter. Lower prices for second hand EVs have tempted more people to try them - and few go back. 

Britain is not large enough to determine the future of the global car industry, but it is large enough to matter when it works with our neighbours in Europe.