Carmakers turn to creative bookkeeping to meet EU CO2 goals

Honda-powered Red Bull Racing in action during the Grand Prix Emilia Romagna at Imola race track, Italy, 1 November 2020. [Photo: EPA-EFE/Miguel Medina / Pool]

Car manufacturers are shelling out millions of euros on so-called pooling agreements with rival firms in an attempt to avoid big EU fines for missing CO2 reduction targets. Fiat-Chrysler, Ford, Honda and others have so far brokered deals.

Next year, the EU-wide fleet-average CO2 emissions limit will be 95 grammes per kilometre. Carmakers were set individual benchmarks tailored to the types of cars they produce and after a gradual phase-in of the target this year, 2021 marks the end of the race.

But some manufacturers like Fiat-Chrysler (FCA) and Ford have acknowledged that they will struggle to slash the emissions produced by their new cars and have turned to pooling agreements, which are allowed under EU law.

FCA was one of the first firms to act, brokering a deal with US electric car specialist Tesla last year. The Italian-American conglomerate will pay Elon Musk’s company hundreds of millions of euros to pool emission data, bringing the average down. 

Honda joined that pool as well in October, according to Schmidt Automotive Research, as the Japanese firm recorded disappointing sales figures for its newest electric model. Tesla’s sales are likely to be high enough to cover both car companies’ needs.

Investing more resources in producing zero-emission vehicles was the driving force behind Honda’s recent decision to axe its involvement in Formula One, where it provides engines for two teams.

Its Tesla-deal is the latest in a slew of pooling pacts: Volkswagen recently teamed up with Chinese partner MG Motor as an “insurance policy”; Ford pooled with Volvo; and Toyota-Mazda extended their existing agreement.

VW races to meet EU target with new pooling deal

Volkswagen has brokered an “insurance policy” agreement with MG Motor that will allow the German carmaker to count the firm’s electric car sales alongside its own, in what is seen as a last ditch effort to comply with the EU’s 2020 CO2 emissions target.

Jaguar-Land Rover is already planning for the worst-case scenario and has set aside more than €100 million to pay fines. The SUV-maker actually has a less stringent target to hit, as it is classed as a niche manufacturer, but is still in danger of missing its benchmark.

Peugeot, which is on track to merge with FCA early next year, is set to comply with the EU target and avoid penalties. The French firm’s small-car electric-power know-how is one of the factors driving FCA’s pursuit of the tie-up.

The second wave of the coronavirus, although largely predicted by health experts, has prompted many of those carmakers to pursue the pooling strategy, as lockdown measures and perilous economic conditions mean sales are not recovering.

According to the European Automobile Manufacturers Association, in the first nine months of the year new passenger car registrations contracted by nearly 30% and September was the first month of year-on-year growth in 2020.

Analysts predict a drop again in October as a result of the pandemic’s second wave.

Carmakers have been accused by activist groups like Transport & Environment of suppressing electric car sales until the tail-end of 2020 in order to make life easier for themselves under the next raft of CO2 targets.

The next major benchmark for 2030 imposes a 37.5% emissions reduction cut compared with a 2021 baseline. Logically, the lower the bar next year, the more difficult it will be for manufacturers to make more cuts.

Europe's car emissions spiked again in 2019, warn new stats

Europe’s average CO2 emissions from passenger cars increased again in 2019, according to the EU’s environment agency, marking the third consecutive year that the statistics have trended upwards.

[Edited by Benjamin Fox]

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