The European Commission has proposed a comprehensive new strategy to reduce carbon dioxide (CO2) emissions from new cars and vans sold in the European Union.
The EU claims that the strategy will enable Europe to reach its long-established objective of limiting average CO2 emissions to 120 grams per km by 2012 – a reduction of around 25% from current levels. To encourage the car industry to compete on the basis of fuel efficiency instead of size and power, the Commission is also inviting manufacturers to sign an EU code of good practice on car marketing and advertising.
European Commission President José Manuel Barroso said: “This strategy is the most ambitious approach ever and the most ambitious approach worldwide towards the development of a low-carbon economy – which is vital for averting climate change. It is the concrete proof of EU leadership in the field. This will require efforts from all sectors, but also open up enormous opportunities for the EU car industries. I call on the EU’s car industries to preserve their long term competitiveness by taking the innovative lead, in the interest of consumers and workers alike.”
Environment Commissioner Stavros Dimas commented: “Cleaner, more efficient and affordable cars will help reduce carbon dioxide in the EU, enable us to achieve our Kyoto targets, save energy and encourage innovation. All Member States will need to pull their weight in implementing the measures necessary and have a major responsibility to encourage the purchase of fuel-efficient cars as well as discourage fuel-inefficiency.”
The current EU strategy for reducing CO2 emissions from cars is based on voluntary commitments by the car industry, consumer information (car labelling) and fiscal measures to encourage purchases of more fuel-efficient cars. Under the voluntary commitments, European manufacturers have said they will reduce average emissions from their new cars to 140g CO2/km by 2008, while the Japanese and Korean industries will do so by 2009.
The Commission’s review of the strategy has concluded that it has brought only limited progress towards achieving the target of 120g CO2/km by 2012; from 1995 to 2004 average emissions from new cars sold in the EU fell from 186g CO2/km to 163g CO2/km. Therefore the voluntary commitments have not succeeded and that the 120g target will not be met on time without further measures.
The main measures that the European Commission is proposing in the revised strategy are as follows:
• A legislative framework to reduce CO2 emissions from new cars and vans will be proposed by the Commission by the end of this year or at the latest by mid 2008. This will provide the car industry with sufficient lead time and regulatory certainty.
• Average emissions from new cars sold in the EU would be required to reach the 120g CO2/km target by 2012. Improvements in vehicle technology would have to reduce average emissions to no more than 130g/km, while complementary measures would contribute a further emissions cut of up to 10g/km, thus reducing overall emissions to 120g/km. These complementary measures include efficiency improvements for car components with the highest impact on fuel consumption, such as tyres and air conditioning systems, and a gradual reduction in the carbon content of road fuels, notably through greater use of biofuels. Efficiency requirements will be introduced for these car components.
• For vans, the fleet average emission targets would be 175g by 2012 and 160g by 2015, compared with 201g in 2002.
• Support for research efforts aimed at further reducing emissions from new cars to an average of 95g CO2/km by 2020.
• Measures to promote the purchase of fuel-efficient vehicles, notably through improved labelling and by encouraging Member States that levy car taxes to base them on cars’ CO2 emissions.
• An EU code of good practice on car marketing and advertising to promote more sustainable consumption patterns. The Commission is inviting car manufacturers to sign up to this by mid-2007.
The European Automobile Manufacturers Association (ACEA), representing the European car industry, has responded by insisting on the need for balanced and constructive CO2 legislation.
It says that the European Commission’s legislative proposal on reducing CO2 emissions from cars “does not offer the proclaimed balanced framework to cut CO2 emissions and to safeguard EU competitiveness and growth. The system, if implemented, would effectively reduce the competitive strength of the European automobile sector and put car manufacturing in the European Union at risk. The proposal would also lead to disproportioned costs compared to the environmental gains and the costs of carbon reduction facing other sectors.”
“The proposal is very disappointing and both its content and the way it was adopted are in stark contrast with the ‘better regulation’ principles of the European Commission”, said Sergio Marchionne, President of ACEA and CEO of Fiat. “All our efforts are focused on further reductions of carbon from cars. The upcoming regulatory framework should support us in a constructive and sustainable way. We urge the EU governments and European Parliament, who will have the final say, to take up this challenge in the months to come.”
The car industry insists on the need for a fair and realistic system with objectives it can meet in an appropriate timeframe. Investments in eco technologies should be recognised and rewarded. The legislative framework system must offer enough flexibility to help manufacturers comply. “We should not be unduly punished for the nature of our production process, which includes long development and production cycles and unpredictable variations in consumer demand,” added Marchionne. “The penalties being proposed are of an unprecedented high level. We are not looking to buy our way out; we invest 20 billion euro a year in R&D and want to continue doing so. If at all, penalties should be reasonable and defined in relation to the market price of CO2 applied widely to other sectors.”
The European automobile sector, one of the most innovative and valuable industries in the EU, is fully committed to reducing CO2 emissions from cars and supports the EU objective of reaching a level of 120 grammes CO2 per kilometre. Improved car technology has delivered significant results over the past decade and will continue to be a major source of further CO2 reduction. The challenge of climate change can, however, not be solved by one sector, one technology or one measure; solutions will be multiple and may differ per region and consumer. As far as CO2 from cars is concerned, the car industry advocates an integrated approach, combining the efforts of all relevant parties involved: auto industry, fuel sector, policy makers and drivers.
ACEA also makes the point that there is no link between the penalties being proposed for the car industry and the price of carbon applied to other industries through the European emissions trading scheme (ETS). The proposed penalties price a tonne of carbon produced by cars at up to 475 euro, whereas the ETS market price will evolve towards about 33 euro per tonne, according to Commission estimates, coming from today’s price of less than 5 euro.
Based on the assumption that a car drives 200,000 km over its lifetime, one gramme of CO2 emitted above target corresponds to 200 kg of excess emissions, or 0.2 tonne of CO2.
If the car industry were to be fined Ă˘â€šÂŹ95 per gramme-above-target, this would equal paying
Ă˘â€šÂŹ475 (5 X 95) for each tonne of CO2, far more than any other sector.
Penalties for the car industry would be significantly higher than any cartel fine paid in EU competition cases, where such fines concern illegal competition law infringements with huge damages for consumers.
Meanwhile, the SMMT has commented by saying that new CO2 rules must balance environmental aims with affordable cars and a diverse and competitive car sector; “While the industry is committed to continuing to work with policy makers to shape a workable solution, the Commission’s proposal has led to concerns, in particular about unrealistic lead-times and costs of non-compliance.”
“We support challenging targets, and in Britain alone we have cut CO2 by an estimated one million tonnes per year since 1997 through cleaner car technologies,” said Christopher Macgowan, SMMT chief executive. “However, manufacturers must not be penalised for past decisions on product development. Proposals must be achievable and cost-effective, implementation dates must be realistic and fines proportionate if we are to maintain the breadth and diversity of automotive manufacturing across the UK.”
The industry is encouraged to note that weight has been chosen as the parameter by which the Commission sets targets for individual manufacturers. This means that those making small city cars may face lower CO2 targets than manufacturers of heavier, luxury models.
Within the framework, the Commission must recognise and protect the UK’s unique lead in making luxury, low volume and specialist sports cars. Low volume producers are estimated to deliver turnover of over £1bn to UK plc, employ almost 6,000 people and produce approx 15,000 cars per year. The SMMT says it looks forward to working with policy makers to ensure appropriate parameters and exemptions are included in the rules to ensure jobs, skills and investment stay in the UK.
According to the Commission’s own assessment, production costs could increase by six per cent per car, and proposed fines are inconsistent with the market price of carbon. According to figures revealed, penalties could be as much as 14 times more onerous than under schemes like ETS – the European emission trading scheme. The SMMT sees this as totally disproportionate.
Christopher Macgowan added, “The Commission acknowledges that investment in new technology has delivered significant and sustained CO2 cuts from new cars in the last decade. A more integrated approach will build on these manufacturer-led reductions and should be adopted going forward. Partnership between fuel companies, governments and consumers will drive demand and lead to the greatest CO2 reductions at the lowest cost to car makers.
“Our message to European policy makers is clear; we want to work with you to deliver cost-effective CO2 reduction measures, while embracing industry competitiveness, product diversity and consumer choice,” Macgowan concluded.