The tricky balancing act of rewarding private business endeavour and legislating for the public good seems to be entering a new phase. The UK government has lost two cases recently; both brought by environmental lawyers Clean Earth and both regarding illegal levels of air pollution within UK towns and cities.
The problems in some areas are well known and specific: around ERA HQ in Southampton for example, much of the blame is aimed at the cruise and container ships heading in and out of port.
As well as in Southampton, the UK government has imposed Low Emissions Zones in London, Birmingham, Leeds, Nottingham and Derby, whilst a further 33 local authorities have been instructed to act now to address illegal levels of pollution, or face similar consequences.*
*A full list of these can be found by searching ‘DEFRA Air Quality Plan’ online
Air quality is a public health issue that can contribute to causing or worsening a range of conditions including strokes, heart-attacks, asthma, lung cancer and dementia, amongst others. According to research co-authored by the Departments for Transport (DFT) and Environment & Rural Affairs (DEFRA), roadside emissions are responsible for some 80% of NOx (Nitrogen Oxides that cause pollution) found at the roadside.
One way in which government can be seen to be taking action is through the creation of these ‘Clean Air Zones’ (CAZ), which are designed to promote public health and make cities more pleasurable places in which to live and work.
London’s ‘Ultra-Low Emissions Zone’ due to take effect in April 2019, will require all vehicles entering it to be EURO-6 or equivalent, or face fines ranging from £12.50/day (vans) up to £100/day (HGVs).
In addition to vans and HGVs, it’s likely that buses, coaches and taxis, as well as private vehicles with older diesel engines could all fall foul of the new requirements and potentially face fines. If you are running a number of vehicles, the increase in costs could be substantial.
Ongoing consultations seem to be suggesting that implementation could take place in late 2020 and HGVs with EURO-4 & 5 engines could be fined up to £100/day. That could even increase to a more-significant £300/day for EURO-3 and older engines, which means that organisations running effective maintenance operations and/or have relatively low mileage and therefore retaining older vehicles, could be penalised the most.
One of the biggest concerns is that DEFRA say they are allowing local councils nationwide to interpret their framework, which could lead to different rules in different parts of the country. This could easily become a major minefield, as organisations face the reality of having to manage multiple vehicle types and different charging mechanisms in different parts of the country.
Freight movements are such that individual vehicles could incur multiple charges in different cities on a single journey, so change is inevitable. Whether organisations decide to use a capital expenditure to replace high emission vehicles with new ones, or simply wear the fines, the costs will rise.
Whilst it’s likely that hauliers and courier companies will pass these costs onto their customers, there remain substantial fears about the impact of the new legislation on smaller operators. There will also be a huge knock-on effect in the second-hand market, with residual values of EURO-5 and below vehicles in danger of overnight collapse. This will leave businesses with significantly reduced asset values at the end of life and cause associated headaches for the Finance team and overall balance sheet.
There has been some noise about phasing and a vehicle scrapping scheme to help operators, although that seems to have died down without delivering anything tangible.
ERA can help to identify current traffic volumes into the existing CAZ’s and dive deeply into the local authority plans vs. your customer base, to identify likely affected areas.
We can also help with the identification of potential new business volumes to CAZ’s so you can factor those into your long-term future planning.
As ever, our service would review how to move your freight in the most efficient and cost-effective manner to the business overall from the perspective of fleet replacement costs, fines, understanding trailer fill and identifying alternative methods of delivery.
Clients could even develop a win-win approach, by targeting an overall reduction in journeys, emissions and reducing cost. This could have not only a beneficial cost and environmental impact, but also produce a great corporate social responsibility story that can be used to differentiate yourself from the competition and promote your brand.
Get in touch to learn more about strategic cost management.
Article by: Simon Paget