The current Transport Energy programme has three strands. Powershift supports the purchase of new LPG, natural gas, electric and electric/diesel hybrid vehicles; the Cleanup programme funds the retrofit of emission reduction equipment; and the New Technology Venture Fund supports cutting edge technologies.
In January, the Government confirmed that it plans to transform the programme into a technology-neutral grants system, reducing the level of some subsidies to comply with EU state aid rules (ENDS Reports 354, pp 54-55 and 360, p 42 ).
Significant splits have now emerged between the Energy Saving Trust - which administers the programme - and its sister organisation the Carbon Trust.
In its response to the consultation, the Carbon Trust argues that grants work best when they are used for a limited period for immature or niche technologies. If grants are available for too long, "they risk creating a grant dependency culture and divert manufacturers' attention from finding ways to reduce the cost premium for new products."
The Carbon Trust estimates that CO2 reductions from Powershift cost about £118 per tonne, compared to £5 per tonne under the EU emissions trading scheme.
"The time has come to examine whether the products which Powershift incentivises are really still at the emerging stage...or whether the products are ready for mass market penetration" - in which case, the Carbon Trust says they would be better supported by fiscal instruments.
Indeed, the Carbon Trust claims that manufacturers of hybrid electric-diesel vehicles will deploy their products in the UK "irrespective of Powershift".
It also says that "there does not seem to be a strong case for continuing the Cleanup programme" as it seldom brings vehicles up to existing best practice standards. An approach based on regulation or minimum standards would be more appropriate and cost-effective.
The Carbon Trust says that while the NTVF "may have a role to play" in demonstrating niche vehicles such as low carbon taxis and fuel cell buses, it doubts that the fund can be "material and influential" for cars.
Overall, it argues that "there is a good case for channelling [Transport Energy funds] into targeted awareness raising and information provision activities." Greater emphasis should be placed on areas that will deliver significant emission reductions, including fuel duty, vehicle excise duty, car tax and voluntary agreements with manufacturers.
Not surprisingly, the Energy Saving Trust's submission is more supportive of its programmes.
PowerShift has been successful in meeting its original objectives of reducing both air pollution and CO2 emissions, the EST insists. Nevertheless, it backs the move towards technology-neutral grants - which, it says, should be based on vehicles' CO2 performance and have an air pollution cap.
The Cleanup programme has achieved cost-effective emissions savings, it claims. "Without EST activity...it will be hard to introduce large-scale mandates for retrofits in the future, as there may not be sufficient supply of cost-effective, approved equipment." It proposes that future grants should be focused on the dirtiest vehicles - particularly buses - in the most polluted areas.
Finally, the NVTF "has played a valuable role in enabling the demonstration of new, cleaner, lower-carbon vehicles." The EST cites demonstrations of a hybrid taxi, an electric delivery vehicle and a fuel cell bus. Future funding for the programme "should be focused towards those demonstrations which have the highest potential for market introduction," it believes. The EST also wants to see a new programme demonstrating fleets of very low carbon vehicles such as buses.