ACEA boss: Even a zero-emission target will fail to address car CO2

Erik Jonnaert

Erik Jonnaert, Secretary General of the European Automobile Manufacturers Association ACEA [ACEA]

Europe’s ambition of heavily cutting CO2 emissions from cars won’t work if it fails to address the 95% of emissions coming from old vehicles, according to Erik Jonnaert, the Secretary General of the European Automobile Manufacturer’s Association, ACEA.

Erik Jonnaert is Secretary General of the European Automobile Manufacturers Association (ACEA). He spoke to Editor and Publisher, Frédéric Simon.

[Update: The paragraphs about emission test cycles were modified on 1 June at the demand of ACEA. Contrary to what he had said previously, Mr Jonnaert was referring to the CO2 test cycle only, not to other test cycles related to different pollutants.]

How are European car makers preparing for the next round of CO2 emission cuts, after the current targets expire?

We have targets to meet by 2021, to reduce CO2 emissions to 95 grams per kilometre, on average. We are at 123g/km for the moment, so we’re on track. But there is another 28 grams we need to deliver over the next seven years.

It’s not going to be easy. The automotive industry will deliver (we have to, otherwise we will pay penalties), but the deeper you go, the more challenging it becomes.

Going deeper entails a number of technological leaps, notably the switch to electric mobility. When do you see the switch happening?

On climate change, we are at a crossroads. And as we move forward in the discussion about CO2 and climate change, we want to ensure we don’t undermine the sector.

We had the climate change package of the Commission, which set a 40% reduction target on greenhouse gas emissions by 2030, which will include transport. We are a non-ETS sector, so the target here is 30%.

When will you have clarity on the next target for the automotive sector after 2021?

There is a stakeholder consultation expected on 18 June, followed by some studies, which the Commission plans to publish in the autumn. Then the Commission will come up with proposals early next year, taking into account the outcome of the COP 21 conference. The first proposals will come out in 2016.

For us, this is an opportunity to reflect on what’s possible and what’s not, taking into account lessons from the past. All manufacturers now have electric vehicles in their portfolio. But there are also other alternative fuels.

Fuel efficiency has also improved, helped by the EU’s CO2 emissions reduction targets. With hindsight, how do you reflect on these targets now?

Clearly, the targets have helped move in the right direction, that’s true. The question is how far can you keep moving. The deeper you go, the more difficult it becomes. In the beginning, targets made it possible to optimise combustion engines. Then, you had to invest in alternative fuel cars.

Now, theoretically, if we want to go further down, we will have to get more out of alternative fuel cars. This means mainly electric cars, but also hydrogen, natural gas – the whole portfolio. Everybody has invested heavily to get to the 95g/km.

Now we have to reflect about how far you can continue going without over-investing. Because at the end of the day, the money needs to come from somewhere! If you look at the price of cars in Europe, they have not evolved in parallel with the investments made. Prices of cars are relatively low in Europe. And frankly, lots of the investments made –especially in electric cars – have not been compensated in the final price. So as you move forward, you need to watch out and avoid imbalances.

For consumers, CO2-based taxation has made a difference. In Belgium, it is more interesting to buy an all-electric Tesla imported from the US than a big gas-guzzling Porsche made in Germany…

In the past, the way CO2 targets have been set has focused on improvements to the combustion engine. We don’t challenge that, we have to continue doing it.

In the future, aside from alternative fuels, we will have to look into other technologies like intelligent transport systems to avoid congestion and reduce CO2.

If you look at CO2 emissions today, it is the result of a combination of things. If you keep a car parked, it doesn’t emit anything, whatever the technology used! And policymakers have so far dismissed the use factor in how to further reduce CO2 emissions – they only looked at the technology for new cars being put on the market.

When you look at the market today, 95% of CO2 emissions come from old cars. So even if you set a zero emission target for new vehicles, you would not address the real issue of CO2 emissions. This debate has been amplified recently with discussions around air pollution from diesel in Paris or London, which started to introduce bans. They started to realise it was the old diesel cars on the market, which were causing all the problems, not the new ones with sophisticated filters.

So fleet renewal has to be incentivised, via tax breaks or otherwise. But the problem is that incentive schemes are very different across Europe, and consumers treated very differently. And the impact on the market is also different from country to country. So let’s try to identify best-in-class incentive models, and expand those across Europe.

You’re asking for some kind of harmonisation on taxation, but this is something which would require unanimity and will be very difficult to obtain…

Yes, in an ideal world we would want harmonisation. But we realise this is politically difficult. However, you can try to ensure there is more exchange of best practices in this respect.

Second, we are now looking at a comprehensive approach. As manufacturers, we are going to continue investing in alternative fuel cars and electric cars in particular, which only represent 0.5% of the European market at the moment. So incentive schemes need to be upgraded. Second is the infrastructure for electric car recharging, which creates anxiety among consumers about when and where they can recharge their vehicle.

A directive was adopted, but targets were taken out. So we need to see this infrastructure put in place. This is why we were so vocal on the Juncker investment plan, to make sure part of it can be used to invest in recharging infrastructure for alternative fuel cars. It can happen on public roads, but also for consumer and office buildings.

Of course there is a standardisation question. If you were to invest in a recharging point today at your home for an electric vehicle of a certain brand, you would have to reinvest in a different one tomorrow if you want to change brand. That doesn’t help. At the end of the day, it’s all about convenience for the consumer.

Here, the brands themselves have been competing to dominate the market with their own standards, which they claim are more efficient. Would ACEA support a standard if it was imposed top-down?

We are in discussions in order to come to this. That’s what we want.

Returning to the emissions reduction debate, what we are looking into is more a comprehensive approach, which includes alternative fuel vehicles, of course, but also fleet renewal, connectivity, etc.

One element we are looking into is the importance of the infrastructure. If you have two identical cars, emissions would be very different depending on the road you use.

Which is why policymakers have focused their attention on engine technology and CO2 emissions…

Yes, but that’s theory. Emissions, in reality, are caused by a variety of factors, including technology, but also use, which has been dismissed by policymakers entirely.

This ‘comprehensive approach’ argument was put forward by ACEA in the past, but it apparently didn’t work. So why would it work this time?

Because we have now started engaging with all stakeholders. For instance, we organised a workshop bringing together the widest range of stakeholders from the infrastructure side: road operators, laboratories doing research on new road infrastructure, etcetera, just to get an assessment.

So what we do differently now is listen to others, (to understand) what they see as potential for further emissions reduction.

What are your conclusions? Where is the biggest potential?

It has to be a combination of factors. Clearly fuel option is going to be big, and fleet renewal is really going to be a big one. But we are really surprised by the impact of eco-driving, which is not only about the drivers’ behaviour, but also the technologies to support them.

So we are currently in the process of making a full assessment. There are different studies that we are contracting out to different research institutes, to get a fair assessment of what the potential could be of each of those elements to further reduce CO2 emissions.

But clearly it seems the way ahead is full electrification, isn’t it?

That’s not true. Indeed, the Commission says in different policy papers that the future lies in full electrification of road transport.

You don’t believe so?

No. First of all, you need to make a distinction between freight and passenger transport. For freight, it is out of the question. Clearly there, we look at other alternatives. We need to be realistic. Electrification is going to be an option worthwhile exploring for passenger transport, but it is not going to be the solution.

The Commission’s 2011 transport white paper set a vision for cities to become 100% free from oil-fuelled cars by 2050 – meaning mostly electric. Do you think this is achievable?

No, this is unrealistic. This target was set at the time based on the assumption that the market uptake for electric cars would be high. This is mainly due to the higher cost of electric vehicles, which is primarily driven by battery, even if fast progress is being made.

Are European car makers still leading in this technology? When it comes to electric vehicles, it is chiefly an American brand which comes to mind, Tesla… Is this making ACEA members nervous?

We continue to believe in the strong leadership of the European automotive industry. The one manufacturer you are referring to is still small and it is losing a lot of money. And they came up with a high-scale premium brand, targeted only at a top-income class of consumers.

Let’s put it in context: all our manufacturers are currently in electric vehicles and have a wide range of brands available in electric version. They have invested heavily because of the 95g/km target, which cannot be met without electric vehicles otherwise they will not get there.

So they will continue to invest. But there needs to be a market uptake, otherwise this investment will have been done for nothing. There are a lot of new things happening within the industry to make this work.

And battery technology is a key one. We invest a lot in new battery technology, also thanks to help from EU funds. If we can get the cost down, the price for consumers will also drop.

Battery is precisely an area where Tesla makes a strong leadership claim…

The price is still high – if they didn’t have all these incentives…

We are strong believers in incentives to get an early uptake of alternative fuel cars. But we are definitely not believers in keeping them in place. Look at the Netherlands. Since last year, tax incentives were revised, and immediately there was a dip in the market. So we continue work on optimising combustion engines. The latest diesel technology has proven to be one of the most effective ones, from a CO2 emissions point of view, as well as fuel consumption.

Again, we are committed to continue reducing CO2 emissions. Innovation is the name of the game in our industry.

In terms of innovation to reduce CO2, you rightly pointed out it was not only about improving the engine, but also about infrastructure and connectivity. And here again, we see US technology firms like Google making fast progress on driverless cars. Is this at all a matter of discussion at ACEA?

Of course! You have a newcomer on this market who is indeed triggering lots of media attention, introducing new technology in the same way as they would do for mobile phones. But our industry does these things differently – it is not marketing-driven, it is technology-driven. So our manufacturers are focusing on testing things thoroughly before going public on any innovation.

When it comes to connectivity or autonomous vehicles, most of our members are also ahead of the game. There is a lot of potential, building on technology that they have already developed in-house. And this happens also with players from outside the sector, which is a new phenomenon. The future for our industry is to ‘connect and develop’.

You’re alluding to industrial partnerships. Could this happen with players such as Google, for example?

It could be. It’s public knowledge that a lot of our member companies have partnerships with a number of them. You will see partnerships with other consumer electronic companies, or with telecom companies.

Because at the end of the day, our industry tries to come up with mobility solutions which better targets the consumer of tomorrow. We are all connected with mobile phones already so you need to make sure that this kind of environment is extended to the vehicle. And that will require partnerships, which opens new horizons.

We are on the eve of reinventing the whole industry. In the past, we were looking at simply producing vehicles. In the future, this industry will look at mobility solutions, providing a combination of products and services, some of which will be digitised.

I am sure that ten years from now, you will not recognise the industry, all driven by the need to have cars which are safer, cleaner and smarter.

Returning to current affairs, the European consumer organisation BEUC recently came up with strong accusations against the automotive industry, saying car markers were essentially lying about the fuel efficiency of their vehicles. How do you respond to those accusations? Do you agree with them that laboratory tests are often far from the reality?

First of all, we reject allegations that we are cheating. Second, some of these allegations try to create the false impression that emission values that manufacturers communicate to consumers should always reflect real driving conditions. The reality is – and they know it as well – that this can never correspond to reality. There is now a false debate going on that we should be in a position to communicate real emission values to consumers. It was never the case and will never be the case, even if we would love it if it was possible. But technically you cannot do that.

The way it was done until now was based on a testing protocol and methodology imposed by law dating back from the eighties. The current test cycle covers fuel emissions or CO2, as well as emission of other pollutants such as NOx and particles. It was based on state-of-the-art technology several decades back.

Now they are being revised…

Indeed, it is now being revised. And we as an industry are fully supportive to updating the test cycle in order to bring it closer to real driving conditions. And we hope to get this new test cycle in place as soon as possible.

Will CO2 taxation levels in EU countries need to be adapted accordingly then?

Of course. All that will have an impact.

Regarding the allegations of cheating, would ACEA or its members consider challenging them legally?

This is up to the companies to decide. To be honest, we don’t want to contribute to a media circus here.

What we are concerned about is making sure the test cycle that is being used now is updated as soon as possible. We hope we are going to be ready by 2017, as BEUC asked.

But there is a contradiction in what some of these consumer organisations are asking for. On the one hand, they are saying that current test cycles do not reflect real driving emissions. And on the other hand, they want to rush things and get something done by 2017.

We would love to have something ready by 2017 but only provided that we get these test cycles right. If we rush things through and have this debate again after 2017, it won’t look serious. We want to look into this and address these concerns systematically so that the new test cycles are robust. But of course, this requires some discussion.

New test cycles are being discussed at global level in Geneva. There was an agreement at the Working Party 29. But the test cycle is for combustion engine cars only, not for alternative fuel cars. So we are currently still discussing those. We were told that this discussion would take until mid-2016 at international level, in Geneva.

Once this is done, the EU will have to adopt it in its legislation. And then you have the Commission which still wants to tweak things left and right and add things here and there. If that happens, you just delay the process.

On the CO2 debate, there has been traditionally a divide within the auto industry between the manufacturers of big heavy cars – typically from Germany – and manufacturers of smaller vehicles, usually France or Italy, which produce less CO2 emissions. How do you manage those tensions at ACEA?

In a very competitive industry. It is normal that different manufacturers have different agendas. And that’s healthy, because competition leads to innovation in the end.

That’s why it is important that we as an industry engage in a reflection now on how we can jointly contribute constructively to the debate on reducing CO2 emissions. This means promoting this comprehensive approach, looking at all the different aspects of what can bring down CO2 emissions, listening to others as well outside our sector.

We are just the manufacturers of vehicles. We buy a lot of the technology from our suppliers so we can learn from them – from fuel suppliers, tire manufacturers, infrastructure managers. And that is what is key for us at the moment – to reach out to all of them and see jointly how we can move this forward.

Obviously some type of cars will find it easier to meet the target. But the CO2 targets apply to manufacturers across their entire portfolio. This is why you see all manufacturers investing in a variety of vehicles.

This has even led to some consolidation in the sector. We saw, for example, Porsche going under full ownership of the Volkswagen group in 2012.

I’m not sure this has anything to do with CO2. Some of these manufactures can get an exemption because of the small volumes they produce, so I would not link this to CO2. But convergence and consolidation is happening, like in any other sector. And this is typical of developed economies like Europe. If you look to China, there are still hundreds of manufacturers so there too you will see some consolidation.

We strongly believe in continuing to produce a diverse portfolio to meet the needs of consumers. We don’t want a Soviet system where the government tells us to produce only one type of car. That, we will resist, we need to offer choice to consumers.

Do you feel your industry is being sufficiently heard by European policymakers? In the past, there was the CARS 21 high level group, which was one of the main forums for the industry to interact with the European Commission. How is this happening now with the new Commission?

I think they are still trying to figure out whether this type of dialogue will be continued. There was also the CARS 2020 action plan in 2012 but for the moment, it is on hold.

Nothing is done yet. We know that commissioner Bie?kowska announced that there will be a continuation but when is not clear yet.

Do you feel this Commission is more open to your input than the previous one or, on the contrary, more closed?

I think they’re still figuring it out, with the new system and the new way of working….

Of course, we will continue to have an open dialogue. At the end of the day, our sector is a big provider of jobs, more than 12 million in Europe. So if the Commission is serious about increasing the contribution of manufacturing to GDP, the car sector will have to play a big part. We are at the middle of the value chain, so we have an impact on many other sectors – up and down the value chain.

There is now a slow recovery of the car market since 2014 although the sales figures are not back to 2007 levels. But if this Commission is serious about jobs and growth, whatever is done on the CO2 side needs to strike the right balance to ensure our sector can remain competitive.

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