The European car market remains highly secluded with national tax systems and environmental regulations the main factor behind price differentials, according to the latest Commission figures released in August last year (EurActiv, 1 August 2005)
"We are in desperate need of an internal market, unfortunately, we don't have one today … because fiscal regulations, in particular environmental, come slicing the European market into sub-markets," said Jean-Martin Folz, the CEO of PSA Peugeot Citroën at a meeting of the European employers' association UNICE on 17 October.
Market segmentation is currently preventing manufacturers benefiting from the economies of scale brought about by the EU internal market, Folz warned. And this also applies to environmentally friendly technologies.
With high oil prices, reducing fuel consumption in cars has become a priority for the EU. But an energy-efficiency action plan put forward by the Commission last week stopped short of forcing car manufacturers to reduce CO2 emissions that would in turn lead to fuel savings.
Instead of a legally binding obligation, the Commission said that it would "if necessary propose in 2007 legislation to ensure that the 120g CO2/km target is achieved [by 2012]". It said it would do so only if it becomes clear that the voluntary commitment is not reached.
What the plan does propose is to harmonise fuel-efficiency labelling throughout the EU to push consumers toward cleaner vehicles. Efficiency labels have been introduced in seven EU countries (Austria, Belgium, Denmark, France, Netherlands, Spain and the UK). They are designed in a way similar to those already in use for electrical appliances, fridges and washing machines with which consumers are already familiar.
But such information is useless if consumers are not willing to pay for greener models, according to a briefing paper drawn up by the Commission's environment directorate, which refers to a 2006 UK report.
"Whereas 83% of car buyers said they were concerned about the environment, only 3% professed that emissions had a significant effect on their purchasing decision," the report stated.
The way forward could be in tax incentives to influence consumer choice. Schemes have already been introduced in the UK, France, and the Netherlands, but they vary widely in scope with measures ranging from a €380 registration tax in France for vehicles with CO2 emissions above 200 g/km to a €6,000 discount for a hybrid vehicle in the Netherlands.
An attempt at harmonising tax incentives for vehicles emitting less CO2 was put forward by the Commission in July last year and recently won backing from the European Parliament (EurActiv, 6 Sept. 2006). But unanimity voting in the Council means that the proposal is likely to be vetoed.