Cars and CO2
With automobile manufacturers expected to miss their voluntary commitments made last year to reduce CO2 emissions, the European Commission has proposed new binding legislation. Amid pressure from the car industry, which currently finds itself weighed down by economic recession, a compromise deal on the new laws was struck in December 2008.
Cars account for around 20% of total European emissions of carbon dioxide (CO2) – the principal greenhouse gas responsible for global warming.
In 1995, EU heads of state and government set themselves the ambitious goal of reducing emissions of CO2 from new cars to 120 grams per kilometre (g/km) by 2012 as a measure to combat climate change. This corresponds to fuel consumption of 4.5 litres per 100km for diesel cars and 5 litres/100km for petrol cars.
The European Commission's strategy was mainly based on voluntary commitments from the car industry, which promised to gradually improve the fuel efficiency of new vehicles. Other strategies, such as raising awareness among consumers and influencing demand through fiscal measures, were also expected to contribute to the overall goal.
The 1998 voluntary agreement between ACEA (the European Automobile Manufacturers Association) and the Commission included a commitment by carmakers to achieve a target of 140g/km by 2008. Japanese and Korean car producers, represented by JAMA and KAMA, made a similar commitment for 2009.
Although significant progress was made, average emissions only fell from 186g/km in 1995 to 161g/km in 2004. The Commission therefore decided that the voluntary commitments would not achieve their target and binding legislation was necessary.
The presentation of the Commission's new strategy, on 7 February 2007 (EurActiv 07/02/07), was preceded by heavy lobbying from both the car industry and green NGOs alike. The German car industry, which is the world's global leader in heavy luxury cars (with higher CO2 emissions), made strident efforts to convince its government to intervene in the development of the new strategy. As a result of these lobbying efforts, the strategy's presentation was twice postponed over serious divisions within the EU executive's own services (EurActiv 22/01/07).
Similar pressures surrounded the publication of the Commission's subesequent proposed regulation, which was finally presented on 20 December 2007. The proposal contains detailed measures for reaching the 120g/km objective by 2012.
- The 'integrated approach' - a compromise solution
The draft Regulation sets a binding target for new cars of 120g/km by 2012.
Nevertheless, the Commission is not asking automobile manufacturers to bear the full responsibility for this reduction, proposing instead an 'integrated approach' where average emissions are to be brought down to just 130g/km through vehicle-technology improvements. The remaining cuts (10g/km) are to be achieved by complementary measures, such as the further use of biofuels, fuel-efficient tyres and air conditioning, traffic and road-safety management and changes in driver behaviour (eco-driving). How this will be achieved concretely remains uncertain.
The European Parliament has backed a non-binding report by rapporteur Chris Davies (UK, ALDE), which insists that carmakers should bear more responsibility for cutting CO2 but be allowed more time to make the design changes. This would ensure that the objective is reached at the lowest possible cost so that cars remain affordable for consumers, MEPs argue. The report thus calls on the Commission to review its objective to 125g/km, through vehicle technology alone, by 2015.
- Spreading the burden among carmakers
The Commission's 130g CO2/km objective is defined as the average of the new cars sold in a given year.
So far, just four European manufacturers (Fiat, Citroen, Renault and Peugeot) are currently on track to meet the 2008 target of 140 g/km, whereas carbon emissions of newly registered cars in Germany still averaged at 172.5 g/km in 2006 – just 0.5% lower than the previous year.
The discussion on how the new target will be translated into specific objectives for manufacturers has thus split the car industry in two, pitting French and Italian carmakers, which typically produce smaller, more fuel-efficient models, against manufacturers of large, high-performance vehicles such as Mercedes, Audi, Porsche, BMW, Jaguar and Land Rover.
The latter – mainly German and UK-based companies – claim that the new legislation will penalise them unfairly as they are simply responding to consumer demand for bigger, safer and more powerful cars. They say that the chances of them meeting the target within the next five years are virtually non-existent with present technologies.
In an attempt to spread the burden more evenly, the Commission's draft Regulation of 19 December 2007 proposes different caps according to vehicles' weight, enabling heavier cars, such as SUVs and luxury models – which it says respond to certain consumer demands – to exceed the 130g/km target, so long as manufacturers balance this production with smaller, less-polluting models.
For those manufacturers specialising in larger or more powerful vehicles, such as Porsche, whose average CO2 emissions currently stand at 282g/km, the Commission proposal leaves the door open to a "pooling" system, whereby manufacturing groups can team up in order to share the burden of meeting their goals.
Special purpose vehicles, such as those built to accommodate wheelchair access, are excluded from the scope of the legislation.
- CO2 fines
According to the Commission's proposal, manufacturers who overstep their CO2 limits will be subject to financial penalties. The fines would be phased in over four years following the entry into force of the legislation, starting at just €20 per gram of carbon dioxide that each car emits over the target in 2012, and rising to €35 in 2013, €60 in 2014 and, finally, €95 in 2015.
Any money raised from the scheme would go into EU funds.
- Impact on consumers?
According to an impact assessment by the Commission, the new rules would entail an average increase in car prices of €1,300, but this would be offset by average fuel savings of roughly €2,700 over the car's lifetime.
But carmakers say the issue of consumer behaviour and how to influence it is often overlooked in the Commission's strategy. Indeed, one of the reasons for the lack of progress on vehicle fuel efficiency is the fact that Europeans continue to buy and drive bigger and more powerful cars – and there are very few policies to dissuade them from doing so.
- Additional measures
The Commission has also proposed:
- To encourage member states to promote and stimulate the purchase of fuel-efficient vehicles, via car taxation (EurActiv 13/03/07) and a review of labelling rules, to include indications about cars' annual running costs, fuel consumption and possible vehicle CO2 tax levels, in order to raise consumer awareness;
- to invest in more research aimed at reducing emissions to an average of 95g CO2/km by 2020, and;
- to require car manufacturers sign up to a voluntary EU-wide code of good practice on car marketing and advertising, aimed at shifting some of the focus away from vehicle performance towards more sustainable consumption patterns. Parliament says this will be ineffective and have called for binding rules on the display of information on environmental performance in all promotional materials, but media agencies immediately rejected this plan saying it would harm the audiovisual sector (EurActiv 25/10/07).
- Tough negotiations
The legislation needs to be approved by member states and the European Parliament before it can be implemented, but many details are still highly disputed.
Nevertheless, France and Germany - the two countries initially seen as diverging the most on the issue - seem to be converging, with President Nicolas Sarkozy and Chancellor Angela Merkel shaking hands in June 2008 over a backdoor deal that would give carmakers a "substantial" phasing-in period, as well as more leniency on fines for those deviating from the target by less than eight grammes (EurActiv 10/06/08).
MEPs in the Parliament's Industry and Energy Committee went in a similar direction in September, voting that manufacturers should be granted an extra three years to fully implement the new caps and that fines should be set at just €40 per excess gramme of CO2 – less than half of the €95 penalty the Commission proposed (EurActiv 02/09/08).
But Parliament's Environment Committee, which has the lead on the issue, later threw out the Industry Comittee amendments, voting in favour of the Commission's original plans and introducing a long term target for CO2 of 95g/km by 2020 (EurActiv 26/09/08).
- Final deal
A compromise agreement to reduce CO2 emissions from new vehicles was adopted in December 2008, after a month of 'trialogue' discussions (EurActiv 04/11/08).
It is a deal based on a French proposal to gradually limit CO2 emissions to 120 g/km for 65% of new cars in 2012, 75% in 2013, 80% in 2014 and 100% in 2015 (EurActiv 01/10/08). A target of 130g/km is to be reached by improvements in vehicle motor technology. A further 10g/km reduction towards the 120g/km target should be obtained by other technical improvements, such as better tyres or the use of biofuels.
The deal also reduces proposed fines for carmakers that breach the limits. Between 2012 and 2018, the fines will be as follows: €5 for the first gram of CO2, €15 for the second gram, €25 for the third and €95 from the fourth gram of CO2 onwards. From 2019, manufacturers will have to pay €95 for each gram in excess of the target.
In the long term, the compromise sets an average emissions target of 95g of CO2/km for new car fleets by 2020.
To see stakeholders' reactions to the final deal, see the 'Positions' section of EurActiv 02/12/08.
Having finally reached a compromise, Commissioners Verheugen (Enterprise) – who had initially rejected the idea of strict CO2 limits – and Dimas (Environment) both underlined that their new proposal would strengthen the EU's car industry and lead to Europe having "the best, the safest and the cleanest cars".
Vice-President Verheugen urged carmakers to see the new strategy "not as a burden" but as a "chance for innovation".
Commissioner Dimas, who had pushed for car manufacturers to reach the 120g/km target on their own, admitted that he had accepted the "integrated approach" where "other stakeholders" would also have to contribute, "but the result for the environment will be the same", he said.
European car producers association ACEA called the new targets "arbitrary and too severe". Pointing to significant reductions (13%) that have been achieved by manufacturers, ACEA spokeswoman Sigrid de Vries told EurActiv that the car industry had achieved more than any other sector and accused public and European authorities of failing to deliver on their part of the 1998 voluntary agreement. Neither labelling nor tax measures to stimulate consumers to buy fuel-efficient cars were put in place in time, she said.
ACEA also blames stringent EU legislation on car safety (eg requirements for air bags and strengthened bodies) for forcing cars to become heavier and less fuel-efficient and says that limitations on other pollutant emissions "have significantly hampered the reduction of CO2".
Furthermore, ACEA Secretary-General Ivan Hodac warned that new legislative measures could have serious implications for the EU's car sector's competitiveness and jobs and will also lead to higher prices.
Christopher Macgowan, chief executive of the UK's Society of Motor Manufacturers (SMMT) warned: "If the Commission is intent on placing the onus onto car manufacturers, then we see serious difficulties ahead. There is a huge threat to employment and the economy. Not only will the choice of cars be reduced by these measures if we are to meet the limits, but independent estimates place a projected increase in the region of £2500 to the sale price of each new car."
He added that no substantive reductions would be achieved unless consumers change their behaviour: "We have already produced and brought to market cars that can meet the 120g/km limit – the problem is that motorists do not buy them!" he said.
Bernd Gottschalk, president of the German Association of the Automotive Industry (VDA), said that "the fastest route to climate protection" would be to encourage rapid renewal of the vehicles on the roads. "If, for example, all Euro 0 to Euro 2 vehicles on Germany's roads [which account for 40% of passenger cars] were replaced by modern environmentally and climate-friendly Euro 4 vehicles, this alone would reduce CO2 output by six million tonnes every year. At the same time the particulate burden would be almost halved," he stated.
He added: "Achieving an emissions target that is strictly neutral in terms of competition is an important requirement," stressing that the Commission should not attempt to apply the same target level to every member state, "and definitely not to every manufacturer".
However, French and Italian car companies want each carmaker to take individual responsibility for meeting the target rather than the industry as a whole. "We do not want to subsidise German gas guzzlers," an Italian industry source said.
Toyota Motor President Katsuaki Watanabe called the EU target extremely demanding and challenging. "Global issues such as CO2 reduction and energy conservation require more than just improved technology," he said.
The International Automobile Federation (FIA) called for the EU to take the lead in negotiating a global agreement on car fuel efficiency. FIA President Max Mosley said: "There is little point in the EU increasing the stringency of its own CO2 commitment if the rest of the world with its rapidly growing vehicle fleet is not also improving its fuel economy standards."
Green NGO T&E (European Federation for Transport and Environment) condemned the Commission's proposal, saying that the "weakening of an eleven-year-old climate target" will lead to "100 million tonnes of additional CO2 emissions over the period 2012-2020".
T&E Director Jos Dings added that industry is attempting to shirk off its responsibilities by calling for an "integrated approach". "If you can find anyone who can tell me how this would work I’d be very happy to meet them," he said.
The NGO further criticised the weight-based approach, saying it would remove incentives to make cars lighter, thereby increasing levels of CO2 and provoking more serious car accidents (EurActiv 30/08/07).
John Hontelez, secretary-general of the European Environmental Bureau (EEB) said: "The Commission has rewarded carmakers' refusal to make fuel efficiency a priority with a more lenient standard than is needed to stop the continuing growth of greenhouse-gas emissions from cars in Europe. This undermines the Commission’s resolve to lead, regionally and globally, on fighting climate change."
The UK motoring guide 'Clean Green Cars' has issued a study rebutting the argument that manufacturers need longer implementation periods.
The study looks at emissions from all model ranges in each class of car currently on sale (ranging from 'supermini' and medium cars to luxury sports and off-road vehicles) and concludes that, if all cars were brought up to the level of the most efficient in their category, average emissions from the automotive industry would already drop to 140.8 g/km rather than the current 162g/km.
"There is no reason why manufacturers cannot follow best practice. If for example, the Toyota Aygo, Peugeot 107 and Citroen C1 can all manage an average of 109 g/km, why do some model ranges of the same size have an average figure of up to 149 g/km? At the other extreme, if the Ford Galaxy range has an average of 171 g/km, why do some multi-purpose vehicles have a figure of well over 200 g/km?" the study states.
- 19 Dec. 2007: Commission presented draft legislation to implement its new strategy on limiting CO2 emissions from cars to 120g/km.
- 1 Sept. 2008: Parliament's industry committee voted to water down Commission proposals.
- 25 Sept. 2008: Parliament's environment committee voted down industry committee amendments that would have offered carmakers more flexibility.
- 1 Dec. 2008: A compromise was reached between member states and representatives of the European Parliament (EurActiv 02/12/08).
- 17 Dec. 2008: Parliament adopted the compromise agreement during its first reading of the dossier.
- Early Oct. 2009: European Commission expected to announce new legally-binding CO2 targets for vans.