Written evidence submitted by Anglo American (IAQ0110)

Introducing Anglo American

1. As one of the world’s leading mining companies and as a major producer of platinum, copper and nickel, Anglo American has an interest in the future of transport/mobility and, in particular the automotive sector, but also a future Hydrogen Economy including heat and power in general.
2. Platinum is a vital component in fuel cell technology that can be used in either hydrogen powered vehicles (road, rail, water) or energy storage. The metal acts as a catalyst as part of the chemical process that converts hydrogen into electricity, with the only by-product being water. Copper and nickel are an important component in almost all electrified vehicles.
3. Anglo American is an important part of the supply chain, with our customers including Original Equipment Manufacturers (OEMs) who are already offering production line Fuel Cell Electric Vehicles (FCEVs) – companies like Toyota, Honda and Hyundai – and cutting-edge fuel cell companies. We also supply platinum to the automotive sector for use in catalytic converters.
4. We believe in the potential of the Hydrogen Economy both in the UK and elsewhere, from FCEVs to heating. Therefore, we have been putting our own venture capital into businesses that are developing, among others, hydrogen and fuel cell products through our PGM Investment Programme[1].
5. Anglo American is a founding member of the Hydrogen Council[2], launched at the World Economic Forum’s Annual Meeting in Davos in 2017. The Council now consists of over 20 leading companies from across the hydrogen value chain (including fuel producers, automotive OEMs, equipment providers etc.), conducting a global initiative to promote hydrogen as a key solution to the transition to a low carbon economy.

Background and summary

6. Our areas of expertise are around FCEVs, the Hydrogen Economy and the policy landscape it sits within. While we know that overcoming Britain’s air quality challenges will not be achieved with any one measure in isolation, we believe that improving air quality is ultimately about reducing the sources of air pollution – primarily the inefficient combustion of fossil fuels.
7. Electric vehicles (EVs) take two forms: firstly, there are FCEVs, which combine onboard hydrogen fuel with airborne oxygen to generate electricity, and secondly there are battery electric vehicles (BEVs), which take electricity directly from the grid to be stored in a battery and then discharged when required. Both have zero emissions at the tailpipe.
8. There are other vehicles that use internal combustion engines, but are still cleaner than many older versions. Plug-in hybrid electric vehicles (PHEVs) use a conventional internal combustion engine alongside a battery electric drive system to increase fuel economy; this battery can also be plugged in and recharged from the grid. Conventional hybrids cannot be plugged in, relying on fuel to charge their batteries. Modern internal combustion engines that meet so-called “Euro6” emissions standards (introduced in September 2014) are far cleaner than older engines.
9. Given recent court action, the Government is pursuing immediate policy measures to improve air quality. While this is understandable given the circumstances, there is a risk that these will treat the symptom, but not the underlying problem of the most polluting vehicles and heating systems, especially when looked at it from a life-cycle perspective[3].
10. Permanent improvements in pollution levels (of which air quality and decarbonisation are two sides of the same coin) will be achieved by ensuring road transport and industry emit fewer pollutants. This means phasing out the use of the most polluting petrol and diesel vehicles in favour of ultra-low emission vehicles (ULEVs) including cleaner engines, like Euro 6, as well as moving away from gas or wood for heating. This transition is not in the future – it has started already; there are both hydrogen FCEVs and BEVs on our roads today. Public policy must now change to meet the challenges that these new technologies are facing.
11. In the coming years, road transport will continue to transition towards a mixture of EV technologies, alongside less environmentally harmful clean-diesel and clean-petrol cars. Research shows that a great deal of urban NOX pollution comes from road transport, so this transition will significantly contribute to improving air quality in cities[4] [5]. This mixture will be needed because BEV technology will not be practical in all situations, for example with longer range, heavier vehicles like large buses and HGVs that would need considerably larger, heavier batteries than for small cars, which would be inefficient.
12. This mixture will have to include both hydrogen FCEVs and BEVs. The technologies will both require scale in terms of infrastructure and manufacturing to ensure they are attractive to consumers. Growth in both industries is a virtuous cycle: growth reduces unit costs, which in turn encourages adoption of new technology. Supporting these industries and removing barriers to growth will benefit air quality in the short, medium and long term. To achieve this growth, infrastructure is needed. BEVs need many more charging stations than currently exist and potentially alterations to the grid to cope with added demand. In comparison, hydrogen can leverage existing forecourt infrastructure at petrol stations in key locations.
13. While the private sector will play a significant part in the transition, the framework that Government creates for it, through both regulation, incentives and public (co-)investment, will be instrumental in shaping the future market for EVs.
14. Supporting growth in both FCEV and BEV technology usage in the UK will create jobs, promote the development of important new skills and support innovation across the UK. Fuel cells are a British invention and the UK has a number of centres of expertise in hydrogen and fuel cell technology (for example The Birmingham Centre for Fuel Cell and Hydrogen Research at the University of Birmingham and Manchester Fuel Cell Innovation Centre at the Manchester Metropolitan University), as well as manufacturing expertise through companies like Riversimple[6], ITM Power[7], Arcola[8] and Intelligent Energy[9]. A technology-neutral approach with Government supporting the growth of a range of new industries will help this flourish further and position the UK as a world-leader.
15. Therefore, we recommend that any approach to improving air quality should maximise the growth potential for low-emission vehicles; and reduce the number of the most polluting vehicles that harm air quality most.
1. To maximise growth for ULEVs, a technology-neutral approach to EVs is crucial. We believe current policy has leaned towards supporting BEVs, which risks undermining the growth potential of FCEVs. FCEVs are on the road today and they offer superior performance in various use-cases. This is especially true with larger, longer range vehicles, for example large cars, SUVs, buses, vans and Heavy Good Vehicles (HGVs). We also believe there continues to be a role for clean-diesel and clean-petrol cars in reducing emissions, provided actual emission levels correspond to claimed efficiencies.
2. The public sector should leverage both its own investment and the investment of its suppliers to support FCEV and BEV growth equally, both in terms of its vehicle fleets and infrastructure investment. Government and the private sector must work together to ensure adequate refuelling infrastructure is in place.
3. Alongside encouraging the uptake of FCEVs and BEVs, there should be measures to incentivise consumers and businesses to transition away from the most polluting, older vehicles. This can be done through the introduction of a scrappage scheme, as well as the introduction of vehicle charging zones like London’s proposed Ultra Low Emission Zone.
4. Crucially, a scrappage scheme must not only achieve a reduction in the number of older vehicles on the road, but must also be paired with incentives to ensure they are replaced with newer, low emission vehicles, for example FCEVs, BEVs and Euro 6 standard diesel or petrol cars (without favouring a particular technology). Older vehicles are often responsible for an excessive proportion of local emissions, and scrappage schemes therefore make sense if they achieve a greater uptake of low emission vehicles.
5. Low emission zones and T-Charges may also have a purpose in this regard, but in our opinion are only effective if revenues will be used for promoting and incentivising uptake of ULEVs.
6. Some of the biggest emitters of pollutants in cities are also the largest vehicles, for example buses and HGVs. Encouraging councils to mandate the uptake of low emissions vehicles with these will help improve air quality. Government should provide incentives for councils to invest in ULEVs.
7. We also believe the UK needs to continue tightening emissions and should keep at the front of global standards.
16. Investing in ULEVs can improve air quality today. According to figures from the IPPR, most air pollution in London is caused by road transport, with current, largely pre-Euro6 diesel vehicles emitting about 40 per cent of the capital’s total NOX emissions[10].
17. Figures from Greater Manchester in 2010 show road transport contributes 75% of emissions of nitrogen oxides[11]. While figures will clearly vary from city to city, this data shows that to quickly improve air quality, then urgent priority must be given to reducing emissions from road transport.
18. The IPPR cites figures (which TfL shared directly with them alongside the author’s calculations) to show that in 2015, TfL buses contributed most to NOX emissions in London (14.2%) followed by HGVs (8%), taxis (7%) and Light Goods Vehicles (LGVs) (4.9%) as compared to private vehicles, which contributed only 2.9%. Eighty per cent of London’s freight is currently delivered by road. LGVs comprise over 75% of commercial (LGV and HGV) traffic, equating to around 7,300 vans per hour during the morning peak.[12]
19. While emissions will clearly vary between cities, these statistics illustrate that pollution from road transport, especially larger vehicles, is a major contributor to poor air quality. It would therefore make sense to start with those vehicles that emit the most.
20. While both BEV and FCEV technologies are available today, they have different features and attractions. Consumers will make purchasing decisions based on the technology that suits their use case. London taxi drivers may opt to use BEVs for city driving, as their shorter range and longer charge times do not pose such a significant drawback given the average length of journeys taken. This may not work for people who travel longer distances or in areas with less battery charging infrastructure. Likewise heavier vehicles like large buses and HGVs would require impractically large batteries, and the range and recharging times of batteries would be limiting factors. The market should be allowed to choose the right technology, depending on the use case.
21. This is why Aberdeen, Birmingham and London are already investing in FCEVs for their bus fleets, which have the range and refuelling time that meet their needs. Depending on the exact size and shape of the vehicle, FCEVs have a range of over 300 miles and a short refilling time (3-5 minutes).
22. In the medium to long term, the development of the technology that powers FCEVs will play a part in transitioning the UK to a Hydrogen Economy, which encompasses fuel cell technology, hydrogen electrolysis, hydrogen gas for heating, Carbon Capture Storage (CCS) and Carbon Capture Utilisation (CCU) in the petrochemical industry.

Do these plans set out effective and proportionate measures to achieve necessary emissions reductions as quickly as possible?

23. The Government’s Air Quality Strategy argued that air quality issues are localised and so advised that local authorities were best placed to respond. While we are yet to see how local authorities intend to action this, we believe the underlying causes of poor air quality will only be resolved when the most polluting cars are taken off the road and replaced with cleaner ones. This requires decisive involvement of national Government, including using public policy levers and investment in both road and rail to provide a national basis for and support to local plans.

24. We believe Government could include or encourage councils to adopt other measures which can help quickly improve air quality by encouraging people to upgrade to ULEVs, including scrappage schemes and low emissions zones.

25. We would support the introduction of scrappage schemes, provided that such schemes are focused on getting the most polluting vehicles off the road and incentivise the purchase of low-emission vehicles in a technology-neutral way, i.e. including both clean diesel/petrol, FCEVs and BEVs.

26. We also support local authorities that are taking substantive action towards taking the most polluting cars off the road. For example London’s and Ultra Low Emissions Zones (proposed to start in 2019). However, this will be most effective when paired with policies that encourage people to trade in and upgrade to both FCEVs and BEVs, as well as Euro 6 standard diesel and petrol cars.

27. These schemes can also be made more effective by leveraging revenues from such schemes to provide much needed refuelling infrastructure (currently a barrier to consumer investment) and supporting local authorities and their partners’ investment in ULEVs, reducing the unit costs for everyone else.

28. However, it is essential that these policy levers do not favour one technology over another, which would have the unintended consequence of slowing the growth of the others, potentially holding back overall emissions reductions. As such all road user charging measures should be technology-neutral, without unfairly favouring or hindering any individual technology, whether that be BEVs, hydrogen FCEVs or clean-diesel and clean-petrol cars.

29. Larger vehicles like buses, HGVs and LGVs also contribute significantly to poor air quality in cities. Therefore, we would encourage the introduction of clean public transport targets at local authority level. Additionally, local authorities could introduce bus design targets, which ensure that buses are designed to meet specific pollution levels, refuelling ability, performance and quality of transport. Manufacturers would then have to submit bids in a competitive procurement process to meet these criteria. This would help ensure that new buses are contributing to cleaner air in our cities – this is immediately actionable as there are ULEV buses on the roads and carrying passengers today, across the UK.

Are other nations or cities taking more effective action that the UK can learn from?

30. We are proud to be an important industry partner in the low carbon transition. We are a founding member of the global Hydrogen Council, launched at the World Economic Forum 2017. It is a worldwide initiative comprising over 20 of the world’s leading energy, transport and industry companies. Hydrogen Council members plan to invest EUR 1.9 billion per year in hydrogen technology for the coming five years[13]. The Hydrogen Council is the most prominent example of private sector leadership on FCEVs and the Hydrogen Economy.

31. The development of ULEV infrastructure will be vital for improving air quality. Currently, perceived inadequacies in the volume of refuelling and recharging infrastructure is a barrier to consumer investment in ULEVs, which in turn holds back the cost reductions associated with a mass market.

32. Hydrogen refuelling and electric charging infrastructure will be built in partnership between the private and public sector. There is a role for Government in leading on this through legislation and policy initiatives (including balanced funding), but the private sector will play an important role in deploying it on the ground and at scale.

33. Some other countries are further down the line with building hydrogen refuelling infrastructure than the UK. Examples from these places show that this progress is best made by the public and private sectors working in partnership. This partnership is required because ULEV infrastructure will only deliver returns in the medium to long term, but without which the new technologies will not flourish.

34. Despite these challenges, there are many companies looking to invest. Globally, this includes the likes of ITM Power (based in Loughborough), Shell, BOC, Air Liquide and Daimler.

35. On the creation of hydrogen refuelling stations (HRS), we advocate a public-private approach, which has proven particularly successful with the German, private sector-led H2 Mobility scheme[14]. Their declared ambition is to have 100 HRSs in Germany by 2018 and 400 HRS by 2023, which would be the world’s largest network of hydrogen stations.[15] Regardless of the number of FCEVs on German soil, H2 Mobility will be setting up and operating up to 100 hydrogen refuelling stations in the urban centres of Berlin, Frankfurt, Hamburg, Munich, the Rhine-Ruhr area and Stuttgart, thereby providing the necessary basic infrastructure for (potential) users.

36. Germany is also beginning to deploy hydrogen trains. In October 2017, the Lower Saxony transport authority Landesnahverkehrsgesellschaft Niedersachsen awarded a contract to supply 14 hydrogen fuel cell trains (and an option for 33 more) to a consortium of Alstom and Linde AG, with a prototype expected to begin carrying passengers in early 2018[16]. British operators, city regions and Government are also in talks with Alstom about bringing the technology to the UK, but it is unlikely to be introduced before 2021[17].

37. Japan is planning for 40,000 hydrogen-powered cars on its roads by 2020, with plans for a 20-fold expansion to 800,000 by 2030. Prime Minister Shinzo Abe has committed to turn Japan into a “hydrogen society” with 80 hydrogen stations either operating or “soon to operate”, doubling to about 160 by the time the fiscal year ends in March 2021, with 320 in the following five years.[18]

38. For context, UK H2 Mobility believes 1,150 HRS by 2030 will be required for nationwide coverage in the UK, and just 65 could provide sufficient initial coverage.[19] The UK currently has just 11 HRS (with another 5 expected by mid-2018).[20]

39. This is a modest and achievable goal and other countries and regions are ahead of the UK. For example, the Benelux region, a region smaller than the UK, has ambitions to have 50 HRS by 2020[21]. There are also 150 new stations planned by 2020 across Denmark, Iceland, Norway and Sweden.

40. The fuel cell was invented in the UK, and the UK has an opportunity to position itself at the forefront of the development of hydrogen FCEVs and the wider economy but, given the long-term nature of HRS investment returns, the Government has a vital role to play in creating business confidence to invest.

41. This confidence will be created if Government language and policy commitments include commitments to the future of FCEVs and the hydrogen economy. Confidence is undermined if Government sends mixed messages on whether or not it supports hydrogen, or if it implements policies which seem to indicate to business that Government supports another technology. For example, current legislation in Parliament refers to hydrogen refuelling as “charging”[22], when this is a misnomer; the result is that investors feel encouraged to invest in BEV charging which this implies “has Government support” rather than the rollout of FCEV refuelling. This is explained in greater detail in the next section.

42. We believe that hydrogen refuelling infrastructure and BEV charging infrastructure should be built out at roughly equal pace to ensure a competitive market for vehicles, and so Government supporting one kind of infrastructure risks locking out the other technology. The rollout of hydrogen refuelling infrastructure is easier than with charging, meaning it doesn’t require the same level of investment or time to build out and places no additional strain on the electricity grid. HRS can easily be incorporated into existing forecourts, with Shell’s launch of a hydrogen refuelling station at its Cobham service station on the M25 a case in point[23].

Is there enough cross-government collaboration to set in place the right fiscal and policy incentives?

43. As the committee has acknowledged by launching a joint inquiry, air quality is an issue that cuts across many Government Departments. However, this is not just limited to air quality, but is true of all emissions reduction measures (e.g. CO2 emissions).

44. The UK is at an inflection point on EVs and change could happen very quickly in the coming years. The Government – and whichever Departments sit under that bracket – need to coordinate and ensure their messages and policy send positive, and technology neutral, signals to industry.

45. We remain concerned that established Government policies risk favouring BEVs, both in terms of application and the signals they send. For example, the Automated and Electric Vehicles Bill refers to “public charging points” for hydrogen refuelling (a misnomer) and Government has several “plug in” grants that include hydrogen FCEVs. While we support ambitions to make them broadly technology neutral in practice, wording is important and risks giving the impression to the market that BEVs are the Government’s preference, guiding investment decisions. In the case of the Faraday Challenge for battery technology, there is no equivalent for FCEVs (or indeed for hydrogen energy storage), despite the UK being the home of the hydrogen fuel cell and with world-leading hydrogen fuel cell expertise.
46. Government needs to ensure that its policy of being technology-neutral is cross-departmental and filters throughout all of its policies. The energy transition, especially the road transport transition, is the responsibility of a number of Government Departments. For example, industrial strategy and energy policy sits in the Department for Business, Energy and Industrial Strategy; transport rests with the Department for Transport; and air quality with the Department for Environment, Food and Rural Affairs. The Department for Communities and Local Government because of local authority remits as well as the Treasury, for financial reasons, but also because of the need for infrastructure (through the National Infrastructure Commission and Infrastructure and Projects Authority).

47. There is a risk that good intentions to ensure technological neutrality in one department could be undermined by other Departments using less precise messages and implementing policies with unintended consequences. Government must speak with one voice. The committees might want to consider whether delivering on air quality is currently being carried out effectively and whether mechanisms like an inter-ministerial committee might further support this.

48. If Government policies unbalance the market in favour of BEVs, the worst-case scenario is that FCEV technology is held back from entering the market significantly, reducing overall opportunities for decarbonisation and air quality improvements.
49. To quote the National Infrastructure Commission: “Given current industry momentum and falling costs, it looks like [battery] electric vehicles will capture the market for low emission vehicles in the short to medium term. History demonstrates that this is likely to create lock-in effects in their favour. This would have negative impacts on the uptake of alternatives, such as hydrogen vehicles, which are promoted by some as a credible alternative to electric vehicles, as well as existing petrol and diesel technologies.” […] “There is uncertainty over whether electricity will be able to fuel heavy goods vehicles, given their weight and need to travel long distances.”[24]
50. We support ambitions to decarbonise road transport and are aware that Government has acknowledged the risks associated with supporting one technology over the other, with Chris Grayling recently telling the Transport Select Committee: “Having been in the first hydrogen cars to appear in the country, I am very impressed by them. There is real potential for the future. I do not want us to be part of a Government who are biased in favour of one technology over another, but I would be very surprised if hydrogen, on both road and rail, did not become a fixture within a not massive number of years.”
51. Government policies will shape the growth of the market for ULEVs, which in turn will influence the level to which we decarbonise and improve our air quality. As such, scrutiny of existing Government policies for ULEVs should be an important consideration for the committee. We ask that the joint air quality inquiry acknowledge the role that this mix of technologies has to play in improving air quality over the coming years.

How can those charged with delivering national plans at local level be best supported and challenged?

52. As discussed, there are four things these plans must achieve:

1. Firstly, while they must clearly meet the UK’s legal requirements, they must also have a wider view on keeping air quality high in the longer term.
2. Secondly, their plans must be technology-neutral. Failing to do so could risk unintended consequences that hinder improvements in air quality in the longer term.
3. Thirdly, the plans must be open to consultation and scrutiny at both a national and local level, to ensure they meet both aims. This means there must be a mechanism for national accountability (for example through Parliament) and there must also be a role for the National Infrastructure Commission and others to ensure the plans are not in conflict with Britain’s long-term infrastructure requirements.
4. Finally, there must be mechanisms (like an inter-ministerial committee) to ensure overall policy consistency at a national level to minimise conflicting activity and priorities at a local level. National policy is running on a number of tracks, with the Industrial Strategy, Clean Growth Strategy, and the Automated and Electric Vehicles Bill all having a bearing on the future of air quality, possibly for decades to come; therefore, they should be aligned in their ambition. This requires government departments to coordinate today, with a long-term vision for the future of reducing emissions from transport in the UK.

53. In return, the private sector will need to play its role by continuing to invest in infrastructure in support of local authorities.

November 2017