Synopsis
This order will amend the Vehicle Emissions Trading Schemes Order 2023 to provide manufacturers with further flexibility on how to comply with the Zero Emissions Vehicle (ZEV) and CO2 standard schemes for new cars and vans.
Further ZEV allowances may be borrowed from future years and restrictions on converting allowances between schemes will be relaxed.
Summary
The Vehicle Emissions Trading Schemes (Amendment) (No. 2) Order 2025 will amend the Vehicle Emissions Trading Schemes Order 2023 on 1 January 2026.
This legislation will apply across the UK.
What will change?
The 2025 order provides further flexibility for manufacturers in how to comply with the Zero Emissions Vehicle (ZEV) mandate and CO2 standard schemes on new cars and vans:
The flexibility introduced significantly relaxes obligations in a range of areas.
A total of four ZEV and CO2 standard schemes are operated:
ZEV: Extended Borrowing Flexibility
ZEV scheme allowances may now be borrowed from further future years: from 2024 to 2029 inclusive, with new borrowing caps for the 2027–2029 period and an increased 2025 cap for both cars and vans. The borrowing repayment deadline is also extended from 2027 to 2030.
ZEV and CO2 Standard: Extended Conversion Flexibility
The flexibility to convert unused CCTS and VCTS allowances into CRTS and VRTS credits is now expanded from 2024 to 2029 inclusive. These caps allow further overachievements against CO2 targets into ZEV scheme allowances
New conversion caps have been established for 2027–2029, and the conversion caps for 2025 and 2026 have been increased, enabling manufacturers to benefit from reducing emissions of their new non-zero emission vehicles over a longer period and to a greater extent.
ZEV: Bidirectional Trading: Conversion of Allowances between Car (CRTS) and Van (VRTS) schemes
Amendments by the 2025 order permit bidirectional trading and conversion between the CRTS and VRTS ZEV schemes. These trades and conversions are subject to the exchange rates stated in the Order.
CO2 Standard: Updated Plug-in-Hybrid Vehicle (PHEV) Emissions Standards
The utility factor (UF) used to calculate PHEV CO emissions has been updated under the Euro 6e-bis standard from 2025 to better reflect real-world driving conditions. Research has shown that the UF previously used under Euro-6d significantly under-reported emissions as drivers are not charging their PHEVs as regularly as anticipated.
To mitigate the impact of higher emissions values for PHEV on compliance with CO baseline targets, manufacturers may apply an alternative reporting method under Schedule 3A, which approximates PHEV CO emissions to values consistent with the previous Euro-6d WLTP test cycle. This alternative reporting is permitted until 2030.
ZEV: Reduced Compliance Payment Levels
Compliance payment levels for manufacturers that fail to meet their ZEV targets have been reduced to £12,000 per car and £15,000 per van for the 2025 scheme year and the remaining duration of the scheme (until 2030).
ZEV: Revised Conversion Eligibility
Eligibility for conversion flexibility now includes allowances from the current scheme year and allows the use of banked CRTS and VRTS allowances from previous scheme years.
CO2 Standard: Vans built in Multi-stage Processes: Correction to MVL Formula
An error in the formula for the manufacturer’s vehicle limit (MVL) has been corrected, ensuring the correct specific CO emissions value is calculated for compliance purposes.
GUIDANCE
The Department for Transport has published a summary of the changes made.
Background
The Vehicle Emissions Trading Schemes Order 2023 introduced four vehicle emissions trading schemes. The schemes are market-based measures intended to promote the supply of ZEVs. The schemes also intend to ensure that minimum emissions performance standards are met for N-ZEVs placed on the market before the planned prohibition on the registration of most N-ZEVs in 2035.
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