The Zero Emission Vehicle mandate is misunderstood: here's what you really need to know

Britain's ZEV (zero-emission vehicle) mandate gets a bad rap. People have been led to think that every year a bigger and bigger proportion of new cars sold must be electric and a correspondingly smaller proportion combustion-engined. But that proportion – 28 per cent in 2025 – is not actually compulsory.

There's also a widespread misunderstanding that manufacturers have to pay a fine for every ICE car they sell above the allowed percentage. A figure of £15,000 has been bandied about.

Actually it isn't so simple. A big part of the ZEV mandate is something called the 'vehicle emissions trading scheme'. The VETS allows manufacturers who register fewer ZEVs than the mandate to trade credits with manufacturers who sell more.

The Government guidance to manufacturers is 92 pages, but its principle is simple. Sell fewer ZEVs than your mandate percentage and you can buy credits from a manufacturer that sells more ZEVs than its mandate.

Several manufacturers – groups, not individual brands – have said their policy is not to bust their mandate. They're terrified of the optics of breaking a green scheme. But is it so bad if there are no actual 'fines'? It's a commercial transaction: they have buyers willing to buy ICE cars in big numbers, so they can pass on to those buyers the price of the credits.

As the scheme's name says, credits are a traded commodity. If there's strong demand for extra ICE cars, then obviously the price of a credit will rise. If not, it'll drop.

The £15,000 by the way, is a cap, and the maximum figure. It's what a manufacturer pays the Government if for some strange reason it opts out of trading.

At the moment the traded price is low. Most manufacturer groups hit their mandate target last year, and if they didn't they were allowed to 'borrow' against next year if they expect to overshoot next year's mandate. They also get an allowance if the CO2 emissions of their combustion cars falls year-on-year. If they're ahead of one year's mandate they can bank credits against later years if they expect to need them then. There are dodges (sorry, derogations) for small manufacturers. And so on.

Fuel-cell cars count as ZEV, too, but it's unlikely they'll be widespread in the timeframe of the scheme. But there's another similar scheme for vans, with lower ZEV percentages, and hydrogen vans might be here in bigger numbers because they often run from depots where a dispenser could be built.

So no, we're not being forced into zero-emission new cars. It's not even that 28 per cent of us are being forced into them this year. The buyers of the ICE cars, assuming there are lots of them, will start subsidising the ZEVs. That'll bring down the price of the EVs, and the mandate will be reached by the natural equilibrium of the market.

As with much public and social policy, the mandate and VETS are built on the principle that the polluter pays.