Managing the business impact of Low Emission Zones
Read time: 7 mins Added: 22/01/2024
As we get closer to the 2045 date the Scottish government has set for becoming Net Zero, we’re seeing the introduction of more environmental targets. Scotland introduced Low Emissions Zones (LEZ) in Aberdeen, Dundee, Edinburgh and Glasgow in June 2022. England has Clean Air Zones (CAZ) in several major cities and large towns. Let’s consider how they impact businesses and what support is available to help you manage additional costs.
What are Low Emission and Clean Air Zones and why are they in place?
To improve air quality and help Scotland and the UK meet their Net Zero targets Low Emission Zones and Clean Air Zones have been introduced in and around major cities.
Air pollution can damage the health and wellbeing of people, plants and animals. In 2023, the Cleaner Air for Scotland report found improvements in air quality as a result of these changes.
A focus on heavy and light goods vehicles
Transport is the largest contributor to CO2 emissions in Scotland. The Scottish government has committed to phasing out new petrol and diesel light commercial vehicles in public bodies by 2025, and in public sector fleets by 2030. It is also investing £7 million in innovations to decarbonise heavy-duty vehicles.
Glenn Bemment, Head of Sectors and Regional Development, Business and Commercial Banking at Bank of Scotland, said, “Clean Air Zones are undoubtedly important in improving air quality and helping Scotland meet its Net Zero targets, but they can add costs for businesses whose vehicles don’t meet the minimum standards. However, there is support available. Making the shift to greener technologies can be better for the environment and it can also save businesses money in the long term.”
Where are the zones?
In Scotland, of the four cities that have introduced LEZs, Glasgow started enforcement against buses in 2018, with wider enforcement from June 2023. Dundee, Aberdeen and Edinburgh will follow in 2024. National standards for vehicle exhaust emissions have been set and you can find out more about how each city will enforce the LEZ.
In England, several cities and different classes of vehicles are included. You can find out which cities have CAZ in place and which vehicle types are covered.
What are the cost implications?
As the Scottish and UK governments commit to the enforcement of LEZ and CAZ, businesses operating within the zones or travelling into them may need to consider the costs of doing so. The zones typically operate 24 hours a day, 7 days a week. To check if you need to pay a charge, here is the information for the different schemes:
For Scotland.
For a CAZ in England.
For London’s low emissions or ultra-low emissions zones.
How businesses can manage the financial impact of LEZ and CAZ
For businesses needing to drive into LEZ or CAZ often, and whose vehicles don’t meet the minimum standard for emissions, the costs can quickly mount up, potentially up to £100 per day for larger vehicles. Businesses wanting to avoid these costs have a couple of options:
Re-route your vehicles
To avoid travelling through the zones, you could adjust the routes your vehicles need to take, although this could lead to inefficiencies. Businesses considering this should weigh up the costs of additional time, fuel, and wear and tear on vehicles through avoiding the zones.
Upgrade your vehicles
Upgrading your fleet to meet the emissions standards could be an option. While this is a significant upfront investment, it would reduce operational costs, and there are grants and incentives available to help.
Financial support
In Scotland, in addition to schemes run by local authorities to help businesses transition to a greener future, there are schemes to support households and businesses with the transition to LEZ. These include:
Disposal Grants and travel vouchers
- Aimed at those who would encounter difficulty in transitioning to the LEZ.
- Eligible households can apply for a cash grant as an incentive to dispose of a non-compliant vehicle.
- Following the disposal, funding is available towards the purchase of a bike, e-bike or public transport pass.
- For micro businesses, funding is available for the removal of a non-compliant car or van, which is replaced by either a compliant vehicle or an alternative, such as an e-cargo bike.
- The scheme is run by the Energy Savings Trust and is means tested.
Retrofit Grants
- This provides support to micro businesses operating within LEZs so they can retrofit their non-compliant vehicles to meet the minimum standards.
- Grants can cover up to 70% of the solution.
- Grants can be available for LCVs, taxis, HGVs and refuse collection vehicles.
- A separate Bus Emissions Abatement Retrofit scheme is also in operation, extending to coach operators and local authority and community transport operators.
More details can be found on the Low Emissions Zones Scotland website.
Plug-in grants
- A plug-in grant is available for commercial vehicles. It offers 35% off the cost of a qualifying low emissions vehicle, up to a maximum of £2,500 for small vans and £5,000 for large vans.
- 250 grants are available for HGVs/LGVs each year (1 April to 31 March) covering 20% of the purchase price of a qualifying small truck, up to a maximum of £16,000. A business can apply for a maximum of 10 grants per year.
- There are also grants of up to £25,000 (maximum of 5 per business) for 20% off the purchase price of a large truck.
Electric vehicle infrastructure grant
- Businesses can apply for a maximum of five grants of up to £15,000 per grant, for the installation of electric vehicle (EV) charging points on their business premises. Businesses must install EV charging for a minimum of five parking spaces.
- A separate grant, known as the Workplace Charging Scheme, which does not help towards the cost of charge point infrastructure, is also available. Both grants may be used for the same site, but not the same charge points.
Workplace Charging Scheme
- If you choose to install one or more electric vehicle charging points on your company premises, you can claim an OZEV (Office for Zero Emission Vehicles) grant of 75% of the installation cost, to a maximum of £350 per socket for up to 40 sockets across all sites.
For businesses based within the LEZ or CAZ, as well as the cost of moving into the zones, there are further implications for your employees, customers and suppliers, who will face additional costs to visit your premises. Home or hybrid working can help employees manage the additional costs.
Supporting business sustainability
We understand that many businesses are keen to make the transition to Net Zero, but many too are facing a challenging business environment, that can make capital investment more difficult. That’s why we’re committed to supporting you to reduce costs, explore efficiencies and improve your green credentials.
Investing in upgrading your fleet to make it compliant with LEZ and CAZ standards can seem like a significant step, even with the grants available. But that long-term investment could make a real difference. We have a range of funding options available to support you.
Growth Financing
Bank of Scotland’s Clean Growth Financing Initiative can help you access discounted lending for investment in a range of green purposes, including low carbon transport. Discounts are available for terms up to five years and can be applied across term loans, revolving credit or asset finance.
Bank of Scotland’s Asset Finance offers different hire purchase and finance lease solutions, including greener vehicles, to new and existing business customers with a turnover more than £100,000 per annum, and that have been trading for 24 months. This allows businesses to spread the cost of the asset over time (12 to 60 months) with the option to own the asset at the end of the term.
Fleet financing is available through our specialist business Lex Autolease. They offer a range of solutions for fleets of all sizes that can help your business become greener.
Here to help
We understand that navigating the opportunities and risks of transitioning to a low carbon future can be challenging, which is why we offer practical support as well as funding. In partnership with the Cambridge Institute of Sustainable Leadership, we have trained and accredited Relationship Managers ready to help your business transition to Net Zero. From reviewing your supply chain to improve its sustainability, to wider green initiatives or even changing your company culture, they can work with you for a better future.
Our sustainability hub is a great place to get started. You can find out more about the benefits of transitioning to be more sustainable, with insights from experts and other businesses, as well as about the support available and how we can help you achieve a cost-effective, efficient and greener tomorrow.