Written Evidence submitted by Mineral Products Association (EVP0146)

The Mineral Products Association (MPA) is the trade association for the aggregates, asphalt, cement, concrete, dimension stone, lime, mortar and silica sand industries. With the affiliation of British Precast, the British Association of Reinforcement (BAR), Eurobitume, MPA Northern Ireland, MPA Scotland and the British Calcium Carbonate Federation, it has a growing membership of 530 companies and is the sectoral voice for mineral products. MPA membership is made up of the vast majority of independent SME quarrying companies throughout the UK, as well as the 9 major international and global companies. It covers 100% of UK cement and lime production, 90% of GB aggregates production, 95% of asphalt and over 70% of ready-mixed concrete and precast concrete production. In 2018, the industry supplied £18 billion worth of materials and services and was the largest supplier to the construction industry, which had annual output valued at £169 billion. Industry production represents the largest materials flow in the UK economy and is also one of the largest manufacturing sectors.

Overview

Our sector has a strong track record on environmental performance, including with regards to transport. The shift from road to rail has been strong and sustained, with a 25 per cent increase 2013-2018 and a particularly strong showing during the Covid pandemic. Each aggregates train removes up to 76 lorries from the road [1], so our members already maximise usage where possible for efficiency and environmental benefit.

Transport is an integral part of the UK Concrete and Cement Industry Roadmap to Beyond Net Zero, published in October 2020, representing 7 per cent of 2018 emissions across all modes.[2] Tackling emissions is therefore critical to reaching net zero.

When new technology is available and performs to the required standards, our sector will switch as it has already done on a number of other technologies – concrete and cement production’s total carbon emissions are down by 53 per cent since 1990, for example [3]. The Government’s role should be to encourage the vehicles to market, so a well-designed phaseout plan would be welcome at the right point in time.

Road pricing is a separate issue, which could simply add to cumulative cost burdens if poorly designed. Our industry already faces substantial costs including the aggregates levy (c. £400 million per year) and the UK’s very high industrial electricity costs on top of the costs of climate change policy.

By making the cost of road use more transparent, introducing road pricing would also fuel demand for better roads and ensuring that maintenance and investment ambitions are met. As a long-term, reliable income stream road pricing should lead to long-term, reliable investment in maintenance to a high standard.

The Government’s ambition to phase out the sale of new diesel heavy goods vehicles, including the scope to use hydrogen as an alternative fuel.

HGVs are essential for our industry, and many others, yet present a challenge for decarbonisation. While the majority of journeys in our industry are short, e.g. 10km average for ready-mixed concrete, HGVs carry heavy loads and are intensively used, requiring power and range beyond today’s non-diesel engines.

In a net zero context, it is essential that diesel HGVs are phased out in due course, but that can only take place once the technology to supersede them is in the market and can be operated effectively – so range power, reliability and other requirements need to be met. One issue to face is that for specialist vehicles such as concrete mixers, the use of the equipment needs to be powered as well as the movement of the vehicle, which could substantially reduce the range available, as diesel is very efficient at such operations.

Turnover of vehicles varies between vehicle types, companies and sectors, with a range from five to ten years. In challenging economic times such as now this tends to slow. This is on a lease or ownership model, varying across the industry. The natural turnover of vehicles is the smoothest and most cost-effective way to change fleets, avoiding stranded assets and enabling companies, tier suppliers and contractors to plan in good time once a reasonable deadline has been set.

A phaseout has the potential to be disruptive to the secondhand market if combined with restrictions on vehicle use. With ULEZ in London and clean air zones elsewhere, the impact on second hand Euro V HGVs and vans was to wipe out most of their value. Giving at least one renewal cycle before a ban on new diesel sales and another cycle on any restrictions on use will minimise loss of second hand value for businesses and unnecessary scrappage.

Any infrastructure changes needed also need to be factored into any such deadline. Fuelling or charging infrastructure for non-diesel HGVs is a significant potential concern that will have to be addressed to enable a shift. Ensuring that HGVs can reliably and quickly refill their tanks or recharge batteries is absolutely fundamental to enabling a shift from diesel once the vehicle technology is sufficiently developed. There is no solution analogous to home charging that is likely to be acceptable in charge time or space required for a fleet of HGVs. For the range and power involved, this must be a well-developed network covering the whole country and enable rapid topping up. The current level of ambition of 2,500 chargers on motorways by 2030 has to be seen as a start only and is unlikely to be close to adequate for HGVs if electric emerges as the main alternative to diesel.

Our sector has a high proportion of remote sites, so partial coverage would be a significant barrier. On-site charging/refilling would be an option but with significant infrastructure costs; this would probably only be feasible if the same fuel solution were developed for non-road mobile machinery and was economically viable.

Electric cars are now well-established in the market and increasingly common on the roads, with electric vans becoming much less unusual, nine years ahead of a 2030 phaseout for new vehicles. Electric or hydrogen HGVs are much further from the market, so we do not believe setting a date now would be appropriate. A phaseout of sales of new diesel HGVs should instead be triggered by the progress made in developing alternatives once they come closer to market. This would give the manufacturers a significant incentive to be among the first to bring such vehicles to market, gaining a competitive advantage.

The variety of potential of uses for scarce hydrogen, and which gain priority, is a concern that must be addressed in the forthcoming Hydrogen Strategy. The transition to net zero has led to all industries seeking alternatives to fossil fuels, creating significant future demand for what will be a scarce resource. It is important that hydrogen is used only where electrification is not an option. Within transport, we would see HGVs and possibly rail freight in areas off the electrified network as the best use of scarce hydrogen. Hydrogen also has potential industrial uses. MPA and its members are running trials funded by BEIS for using hydrogen in the production of industrial lime, replacing natural gas, an example of a process that cannot be electrified.

Our sector already faces perverse incentives that are poor value for money for the taxpayer and do not maximise emissions reductions. Biomass is incentivised away from its most efficient use in direct-fired operations in favour of electricity and heat generation by subsidy. In transport, encouraging hydrogen options for transport that can be electrified, such as cars or buses, could have a similar negative impact.

The Government’s recent “Decarbonising Transport: Setting the Challenge” reads cautiously on HGVs and is right to do so, focusing on near-term improvements in efficiency. We believe this remains the right strategy for now, keeping net zero by 2050 in mind but focusing on the achievable. A phaseout date will be helpful once the manufacturers are closing in on a mass-market non-diesel HGV.

Road pricing

Road pricing has many different variants and options. Indeed, fuel duty and VED are effectively forms of road pricing, albeit very indirect. With a shift to electric vehicles over time Government will need to replace the revenue from fuel duty, especially given the current economic circumstances. It is important to ensure this is spread fairly across all road users, and not seek to place a disproportionate burden on businesses.

There could possibly be some efficiency gains from road pricing if it is dynamic, moving traffic that can move to do so. However, many industries will be limited in the extent to which this is possible and the potential benefit should not be overstated.

This is particularly the case in our industry, since supplies of the materials we provide are often time-sensitive. Our members’ sites, and those of their customers, very rarely operate 24 hours a day, especially in urban areas.

Road pricing will not by itself drive more modal shift to rail, which is already constrained by the availability of train paths. There has been a significant increase in our industry’s use of rail freight during the Covid-19 pandemic, with fewer passenger trains leaving more capacity. This demonstrates that there is scope for more rail traffic for our products if there is space; there is no need of a further financial incentive which will not in itself create more freight paths.

A move to pricing road use more directly would lead to higher expectations of standards. For local roads, the 2020 ALARM survey found a cumulative maintenance backlog of 11 years, at a one-time catch up cost of £11.14 billion.[4] Highways England’s Road Investment Strategy would also be expected to deliver more the more directly it is paid for; performance of RIS1, with 37 our of 112 projects not delivered does not suggest this is likely.

There are significant cumulative burdens on our sector already and adding a road pricing scheme that raised costs would be deeply unhelpful. The removal of red diesel from non-road mobile machinery in 2022 (c. £100 million per annum cost) and potential increases in the aggregates levy (currently costing around £400 million per year) are substantial costs that do not or will not drive environmental improvements.

Until there are alternatively fuelled HGVs on the market, any pricing scheme would also not drive change. Once there are hydrogen or electric HGVs that can deliver the same outcomes as diesel options, we would expect our members to switch within the normal replacement cycle, as long as infrastructure roll out and other practicalities are satisfactory. Pricing could marginally accelerate this, but it is unlikely to be significant compared to a phaseout date.

March 2021

Endnotes