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EU Commission to Propose Legally Binding Fleet Average CO2 Emissions

6 February 2007

by Rafael Seidl

Tomorrow, 7 Feb, the EU Commission is expected to propose legally binding fleet average CO2 emissions of 130 g/km from 2012 onward based on the NEDC, for class M1 vehicles (4 wheels, driver plus max. 8 passengers, GVWR <3,500kg or 7,700lbs).

Originally, the EU was planning to require an average of 120 g/km. To make up the remaining 10 g/km, automakers will be have to make their vehicles compatible with more aggressive biofuel blends, and add tire pressure monitors. Soft measures such as training drivers to drive less aggressively will not be counted towards this indirect reduction because at present their success is considered too hard to quantify reliably.

For reference, assuming the currently roughly equal market shares of gasoline and diesel engines continues to hold, 130 g CO2/km implies fleet average fuel consumption of just 5.4L/100km (43.4 mpg US) for gasoline and 4.8L/100km (48.9 mpg US) for diesel vehicles.

While it is true that the NEDC is less demanding than EPA’s updated test procedures, these targets still represent a much tougher standard than CAFE in the US. Moreover, CAFE data is skewed in favor of large SUVs and trucks via the FFV loophole.

On the eve of the EU announcement, it looks as if the fleet average is likely to be based on the sum total of all vehicles initially registered in all EU member states in a given year. In other words, the directive would require the individual manufacturers to sort out among themselves how the goal is to be achieved—essentially a continuation of the model ACEA, JAMA and KAMA chose for their respective current voluntary commitments. There is no word yet on what sanctions would follow if the industry failed to meet the new, legally binding target.

However, note that while the EU Commission is the only body permitted to propose new EU directives, they must also be approved by both the European Parliament and the Council of Ministers. The formal proposal is not expected until the first half of 2008 and, it can take another two years of debate and amendments before it is passed into law.

According to Die Welt, the engineering measures required to meet the proposed target without substantially reducing vehicle performance are expected to add an average of €600-800 to the actual price of a new car. Gasoline prices at the pump average €1.22/L in Germany right now.

Assuming an annual driving distance of 15,000 km (9,300 mi), reducing consumption by 1L/100km (equivalent to 24 g CO2/km) yields annual savings of €183, implying an acceptable amortization period of 3-4 years for the average incremental price of the vehicle. Diesel costs about €1.08/L right now, but such cars tend to average 20,000 km (12,430 mi) annually; therefore, the ROI horizon for 1L/100km saved (equivalent to 27 g CO2/km) is even shorter.

The above calculations assume that fuel prices will rise in line with future inflation. Without high fuel taxes, the ROI horizons would be too long for aggressive CO2 emission/fuel economy measures to have a reasonable chance of winning customer acceptance.

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February 6, 2007 in Europe, Fuel Efficiency, Policy | Permalink | Comments (23) | TrackBack (0)

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This should crack the market wide open for electric vehicles since they would help balance out the numbers more than any other single technology that's able to be deployed in the near term and probably why Total wants a share of the nuclear market.

Well, Erick, you are right.

For anything bigger than small car hybridization is the only way to comply without sacrifice of performance, diesel or gasoline.

I am wondering, what kind of loophole will be engineered for survival of Porsche, BMW, Mercedes, Audi, Jaguar, etc. etc.

Andrey:

I imagine that since the CO2 emissions standard is to be calculated across the entire base of registered automobiles, high-performance and luxury marques would survive on the backs of mainstream brands selling cars which perform substantially better than the absolute limit. The article seems to imply that the exact mechanism of enforcement and exchange between the companies is not worked out yet, but I could see a number of schemes which raise the price of a luxury car by a certain amount, and use that added revenue to subsidize the production of high-efficiency models or promote the development of efficiency-increasing innovations. This could be achieved by the direct transfer of tax and subsidy, by the creation of tradable credits for each car sold that exceeds the efficiency targets, which are consumed whenever a less-efficient car is sold, etc.

My question at the moment is, if efficiency increases can be presently acheived with the expenditure of an additional 600 or 800 euros -- implying a payback time of under 5 years -- why does the market not already bring those more efficient designs into production? Are they based on new technologies that will take time to filter down into the installed base of automobiles? Do they require the sacrifice of performance or features, which the market will not bear naturally for the sake of saving a few hundred euros worth of fuel over the long term?

Yu can tell exactly how the lux car makers plan to survive. H2.

Iys why even h2 ice engines are planned seriously. When your dealing with a lux car the fuel cost doesnt matter the performance and specs of the car are all that matter.

GreenFuel Technologies recently announced a partnership with a German company, IGV. No doubt this has something to do with it.

This is another step in the gradual erosion of the privileges enjoyed by the 20th century middle class; in this case the ability for most to own and drive a big car. It reminds me of when Concorde was mothballed. In various countries there are or will be restrictions on airconditioning, watering the front lawn and airline travel. The times are certainly changing.

Aussie,
With privilege comes responsibility. To your neighbors and to your generations to come. THis is part of being a CIVILIZED person and enjoying the benefits of a CIVIL country and world. Otherwise you are just a hedonist live for pleasure today and damn everybody and everything else.

I don't expect the fueling infrastructure needed to support widespread H2 use in luxury cars will be online by 2012, when these regulations are expected to take effect.

I also don't expect the EU to ignore the CO2 footprint behind H2 production, if it should come into widespread use as a motor fuel. While H2 can be generated from renewable and nuclear energy (both of which arguably have minimal CO2 footprints), if commercially available H2 is, in fact, generated from fossil fuel energy I would certainly expect the EU to formulate regulations to take that into account.

I wonder how the EU plans to account for PHEVs under this scheme, should they ever be introduced into the European market in large numbers.

I could imagine a scheme whereby the kwh/km efficiency of a BEV is calculated and multiplied against the average CO2 footprint per kwh, given the electricity generation mix in use across a given country or continent. That would ignore the likely changes in generating mix that may take place over the useful life of the car, and also possibly ignore any CO2-oriented regulations aimed at the electricity industry as a whole, but would be close enough.

I suppose in the case of a PHEV the regulators would have to determine, in aggregate, how much liquid and how much electricity the average PHEV of a particular type will take in over a year of typical use, multiply those figures by their CO2 footprints to determine total CO2, and divide that over the number of expected km. If you include biofuels in the liquid fuels category, you'd have to come up with an average CO2 footprint per unit of biofuel, and then come up with an average expected rate of biofuel consumption per vehicle per year -- a step the CAFE loophole so blithely ignores.

The problem is, for single-fuel cars, you can more easily come up with a standard CO2 / km footprint by testing the car for a brief period over an idealized set of driving routines to figure out the average economy, which is admittedly not the true economy for every case, but again, close enough. With electric cars, you have to match that energy per km figure against the CO2 footprint of the generators, which adds a little complication.

With PHEVs, you have to come up with a complex and debatable set of assumptions regarding the long-term usage and charging pattern of the automobile, on average, and add that on top of all that's come previously. In this case, there are so many complex variables whose values are going to be little more than educated guesses that the scheme is in danger of becoming opaque, corrupted, unfathomable, or just plain silly. Yet, if PHEVs have to be accomodated to a results-oriented CO2 emissions scheme, this would seem to be the way to do it.

Good point. I think that ironically the rules of the CO2 cap proposal could actually delay the introduction of PHEVs, as how does a manufacturer prove that a certain proportion of miles would be done on electric power by consumers?

Erick, NBK-Boston -

I get the impression the EU Commission has not really given BEV/PHEV concepts much consideration because local auto makers are not currently projecting significant market share for them by MY 2012. The push is for biofuels, last not least because France will likely insist on some form of agricultural subsidies even beyond 2013. Plus ca change.

The emerging BEV/PHEV/V2G tecnologies do raise a valid point, however. Any vehicle that is partly or wholly fueled off the grid should be treated differently wrt CO2 emissions than one that runs autonomously by combusting fuel (i.e. ICE-only or regular HEV).

My personal preference would be to count CO2 emissions at the location where they are produced and let market mechanisms take care of distributing the monetized cost and risks of these emissions. In practice, that would mean the introduction of BEV/PHEV would make it easier for the auto industry to meet its new CO2 targets by shifting some of the burden to the electricity generators, who already trade GHG emissions certificates.

Prices for electricity would no doubt go up, but on a per-kWh basis they are currently just a fraction of those for transportation fuels. Nevertheless, BEV/PHEV/V2G would produce strong incentives to limit the CO2 footprint of electricity generation. Nuclear is an obvious candidate, though there will no doubt be fierce political debate about the extent to which its use is acceptable - especially in places like Germany and Austria.

Renewables are generally seen as preferable and places like Austria already have a lot of hydro dams and wind turbines. However, scope for further expansion is limited. Spain already operates a few thermal solar power stations and will likely expand that capacity. Perhaps BEV/PHEV/V2G technologies will catch on there, but I would expect Switzerland and the UK to beat them to the punch.

One factor that mitigates heavily against BEV/PHEV/V2G and in favor of biofuels is that transportation fuel taxes represent a significant portion of the tax base in almost all EU countries. Shifting that burden onto all electricity customers, including industry and people who don't own a car at all, would be politically difficult. If they wanted to, Greece and other Mediterranean countries could produce significant quantities of algal oil in sheltered sections of their coastlines (e.g. Isthmus of Corinth), though the environmental impact would be significant as well.

An ever-increasing tax on fossil carbon would be much simpler, more direct, and cover all sources, and would therefore be more effective. It is somewhat regressive but that can be offset by refunds to low-income taxpayers.

The only proven effective way to reduce Fossil CO2 is rationing.

All fuels have a co2 cost to create so its gona be funny watching that mess.

Andrey, EU is not the States, they do not need a loophole. BMW, Audi, Merc and Jag are very close to meeting the mpg targets already.

The 1-series, the long awaited new A1, A-class and Peugoet-Citroen diesel engines (for Jag), respectively, should ensure meeting the targets.

Rafael, good points.

The best thing the commission could do would be to assume that PHEVs run on electricity only, which means they'd come in at about 60g / km / ton in the UK, and about 10g in France.

I know this would give them an unfair advantage, but that's the point. At least until they make up a couple of percent of the entire fleet.

By the way, prices for electricity wouldn't be effected till PHEVs make up a significant proportion of vehicles.

Loop:

GCC news from Jan 24:

"The European Commission has delayed action on a legislative plan to mandate the reduction of CO2 from new cars to 120g/km by 2012 due to internal dissension.

A senior German source in Brussels highlighted the rifts, saying: “If we force a target of 120g per kilometre on each new car we would have to close DaimlerChrysler, Audi, BMW and Porsche and that’s not possible. We have to make Europe the leader in green technology while boosting output and jobs.”

BTW, how about loophole for diesel cars emissions in EU and German subsidies and free carbon credits for coal power plants?

Alex -

since PHEVs are being pushed by California companies rather than any European ones, I sincerely doubt the EC Commission will propose giving that technology an unfair advantage. Wrt electricity prices, finance ministers will have to respond if revenue from transportation fuel taxes were to drop off even a little bit. Governments in the Euro zone are *supposed* to keep their budget deficits below 3%.

Andrey -

you're quite right, the European system has its own distortions. The difference is that diesel is actually widely available and therefore used. E85 is still very much a boutique fuel except maybe for a few states in the Midwest. As for industry spokesmen predicting the end of the world if regulation happens, well, that's part of the spin they're paid to produce. When push comes to shove, no politician in Germany, France or Italy is going to sit on his/her hands if mass redundancies are really going to happen because of this CO2 regulation. And with F. Piech effectively calling the shots again at Porsche, VW and soon MAN, it's most unlikely that the German auto industry will let it come to that, either.

Giving the first batch of CO2 emissions certificates away to industry is now widely considered to have been a huge mistake. Expect the next set to be auctioned off, much like the electromagnetic spectrum.

Rafael:

Pushing the CO2 regulations upstream in the case of partially or wholly electric-powered cars is probably the easiest solution to implement, and the one which provides uniform incentives for both conservation and alternative energy development.

However, my impression is that there is a bit of an apple-to-oranges comparison that might take place here. The automotive regulations are aimed at achieving a certain average rate, per km per car, of CO2 production -- 130 g/km -- with no limits on the number of cars that can be registered within the EU or limits on the total number of automotive miles that can be driven within the EU during any given year. Given a large enough number of efficient cars driving a large enough distance, there is no limit on the carbon that can actually be emitted.

On the flip side, my impression of the regulations that the EU is trying to implement over the electricity industry is a yearly cap on total emissions. The only way to generate more power in this case would be to turn to renewables or improve the kwh/CO2 efficiency of fossil plants. Under the automotive regulations, a valid way to drive more km to to burn more fossil fuels -- in efficient cars. Under the electricity regulations, burning more fossil fuels in highly efficient plants is not a valid way to generate more kwh.

In a hypothetical case where a large number of electric cars hit the European road, they could potentially consume a large amount of electricity -- meaning a large number of carbon credits -- and then the only way to increase supply would be to turn to renewables, which may or many not be up for the job. If they were PHEVs, and if electricity capacity was reaching a critical shortage due to lack of new capacity, I could imagine a push to urge consumers to plug in less and burn gasoline more, even if the total well-to-wheels efficiency of plugging them in was superior. That would be admittedly perverse.

One way to resolve this apples-to-oranges comparison would be to create a mechanism which explicitly created additional carbon credits, to be sold to the electricity industry, based on the number of BEVs/PHEVs sold and registered in the EU. The number of new credits offered would be enough to offset all the new electricity demand caused by the vehicle fleet, and priced high enough to make electric companies take a hard look at renewables first. By keeping BEVs/PHEVs plugged in as much as possible, this should displace more than enough gasoline consumption to balance the CO2 equation.

"Gasoline prices at the pump average €1.22/L in Germany right now."

About $6/gal. Quit your belly aching America.

As has been stated many times people wouldnt mind paying more for gas and other things via ales takes or vat taxes IF it replaced income tax. To be able to do away wityh tax time would be a godsend. And the increased cost delta of larger cars and trucks would encourage alot morewho dont realy need the large things to dwnsize.

But only if all those blasted income taxes and social sevuity taxes and all that end of year fiddly crap went into a vat/sales tax systeminstead.

Wintermane, How do you make that fair in a country where some people make a million dollars a year and other people make $19K?

Rafael,

It's a shame PHEVs are being pushed in America more than in Europe, where they will economical much sooner. However, there are some European companies pushing them.

However, I suspect you're right about the European commission. The German companies are pushing hydrogen, so the commission won't favour PHEVs.

Regarding tax revenues, up to about 10% penetration, Governments can respond to the loss of fuel duty revenue from PHEVs by pushing up fuel duties for everyone else. This can be justified by saying "people have a choice - they can drive a PHEV".

Beyond that, and road pricing becomes fiscally necessary.

Life isnt fair. In general tho ricj people buy more crap and if they arnt then they are investing in people who buy crap with that money.

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