Repeal the ZEV mandate: calculation note

Central fiscal result

-£0.2bn - Net fiscal impact in 2028-29

Low case: -£1.0bn. High case: +£2.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model repeal of ZEV sales targets by 2028-29.
• Central fiscal effect is small and slightly saving-positive.
• Baseline is existing vehicle emissions trading schemes.
• Fuel-duty and oil-licensing changes are separate policies.

Affected population

• Affected population is vehicle manufacturers, dealers and car buyers.
• Direct exposure includes new car and van markets.
• Indirect exposure includes charging, battery and fuel supply chains.
• Fiscal effects are secondary to investment effects.

Gross impact

• Central fiscal saving: £0.2bn from lower support needs.
• Penalty receipts and emissions costs are uncertain.
• High case assumes higher support needed later.
• No consumer welfare estimate is scored.

Fiscal build-up, central case

• Lower EV support spending: -£0.3bn
• Lost penalty and scheme receipts: +£0.1bn
• Administration savings: -£0.1bn
• Future compliance costs: +£0.1bn

Central net impact: -£0.2bn in 2028-29.

Behaviour and pass-through

• Low case assumes repeal reduces subsidy needs and compliance costs.
• Central case assumes small fiscal effect with mixed behavioural responses.
• High case assumes delayed transition raises future support costs.
• Manufacturers may still follow global EV trends.
• Consumer prices may fall near term but fuel use rises.

Phasing

• 2026-27: £0.0bn. Preparation or partial implementation.
• 2027-28: -£0.1bn. Main ramp-up year.
• 2028-29: -£0.2bn. Target-year central estimate.
• 2029-30: -£0.2bn. Continuation at steady-state assumptions.

Main source groups

• Department for Transport, "Zero Emission Vehicle mandate and CO2 regulations cost-benefit analysis" (2023): The official appraisal assessed direct costs and benefits of the ZEV mandate and CO2 regulation; anchors transport decarbonisation trade-offs.
• Department for Transport, "Vehicle emissions trading schemes: final compliance information 2024" (2026): The 2024 scheme-year report records compliance information under vehicle emissions trading schemes; checks whether repeal addresses actual non-compliance or transition costs.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Aghion, Dechezlepretre, Hemous, Martin and Van Reenen, "Carbon Taxes, Path Dependency, and Directed Technical Change" (American Economic Review, 2016): Carbon prices and fuel prices can redirect innovation toward cleaner technologies; relevant where policy weakens EV and clean-energy incentives.
• Goulder and Parry, "Instrument Choice in Environmental Policy" (Review of Environmental Economics and Policy, 2008): Instrument choice matters: taxes, permits and standards differ in efficiency and distributional effects; relevant to carbon pricing, CBAM and ZEV mandate choices.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.