ACEA President Argues for a Delay of European CO2 Limits on New Cars; Calls for Integrated Approach and CO2 Taxation
17 May 2007
European automakers need at least three additional years prior to the implementation of a legislative framework mandating reductions in CO2 from cars, according to Sergio Marchionne, President of the European Automobile Manufacturers Association (ACEA) and CEO of Fiat.
In a speech to the ACEA, Marchionne argued that the proposal from the European Commission mandating an average target for new cars of 130 g CO2/km by 2012 with an additional 10 g/km reduction from other measures such as biofuels, still puts too much onus on vehicle technology. The EC’s original target was 120 g/km from the vehicle.
The car industry demands a cost-effective strategy to further reduce CO2 from cars. We want an integrated approach combining further vehicle technology improvements with contributions from the fuel industry, policy makers and car users—and involving CO2-related taxation.
CO2-related taxation can significantly contribute to reducing carbon emissions from cars, because of its influence on consumer demand. Eleven EU Member States have already implemented such measures. But only a harmonized taxation system in all 27 Member States will really have an effect.
An integrated approach is essential, because it does not only affect new cars, but also existing cars on the roads or, in other words, traffic as a whole. That is important, as CO2 emissions from new cars have decreased significantly. The majority of emissions is caused by an aging car fleet on Europe’s roads, growing congestion, a lack of traffic management and an increase in mileage driven per user.—Sergio Marchionne
The announced legislative framework will most likely not be ready before 2009. By then, cars for 2012 will already be designed, he said.
A legislative process cannot be disconnected from our long-term planning of model changes. The industry must be given lead-time to meeting any new requirements until 2015 at the earliest.—Sergio Marchionne
The Japanese government set new CO2 emission goals in 2006 with a 2004 baseline, translating into a target for vehicle technology of 138 g CO2 per kilometer by 2015—a ten-year time line, he said. Japan is also taking an integrated approach, with 52% of its reduction coming from measures other than vehicle technology.
Between 1995 and 2005, the European automobile industry has reduced emissions from new cars by over 13% or, in absolute terms, 25 grams CO2, to 160 g/km. However, the industry will not meet its voluntary goal of 140 g/km by 2008—an impending failure that gave impetus to the decision to push for a legally binding targets.
Marchionne puts some of the responsibility on government and the consumer.
Today, one third of all European cars leaving the factory emits less than 140 grams. More than one million cars are put on the market every year that emit 120 grams or less. Impressive as this already is, the results could have been better, had there not been EU regulations that negated some of these achievements, a weak demand for fuel efficiency and a consumer preference for larger and safer cars.
A majority of consumers are not ready to pay for fuel-efficient solutions. Highly CO2-efficient cars, brought into the market in line with the 1998 Commitment [the voluntary agreement], have met with very low demand despite considerable marketing efforts.
Instead, buyers have opted for larger and safer cars, due to factors such as an increasingly dense traffic, demographic trends, and changes in lifestyle. Together with EU regulations, in particular on safety and air quality, this has had a huge impact on cars: within car segments, models have increased by an average 16% in weight over the last decade and are 10 cm longer as a consequence of pedestrian safety measures. Translated in CO2 emissions per kilometer, the low demand for fuel-efficiency, the market trend towards larger cars and burdens resulting from additional EU regulations cumulatively account for almost 15 grams. That is a lot.
Marchionne said that there is no single solution to cutting carbon emissions from cars. In the short term, progress will come from incremental enhancements in engine technology, improved aerodynamics and reduced vehicle weight, he projected. Technologies such as stop-start, gear-shift indicators, tire pressure monitors and efficient air conditioning will become standard.
By 2015—looking back at where we are today—we will see another significant reduction in carbon emissions from cars, comparable to the one delivered between 1995 and 2005.
A 13% reduction in CO2 by 2015—the percentage reduction in CO2 emissions from 1995 to 2005—would put the average level at about 140 g/km: the original voluntary target for 2008.
ACEA represents the thirteen major European car, truck and bus manufacturers. Members are: BMW Group, DAF Trucks, DaimlerChrysler, FIAT, Ford of Europe, General Motors Europe, MAN Nutzfahrzeuge, Porsche, PSA Peugeot Citroën, Renault, Scania, Volkswagen and Volvo Trucks.
Mr. Marchionne has a point when he says that reducing fleet average CO2 emissions from newly registered cars to (130-10)g/km using technology alone will be expensive and slow. An integrated approach combining demand generation (via taxation), market amalgamation (via tax harmonization), infrastructure policy, fuel innovations *and* vehicle technology would indeed make more sense in the long run.
Unfortunately, ACEA has a long history of lousy PR. The organization entered into a voluntary agreement with EU governments in the 90s to bring fleet average CO2 emissions to 140g/km by MY2008. There were caveats, but once you commit to hard targets and dates those tend to be forgotten about. As a result, the European - in particular, the German - auto industry now looks as if it had deliberately stalled.
This is not entirely fair, but advocating a further three-year delay now will be perceived as yet more stalling. In particular, tax harmonization requires unanimous decisions by 27 widely disparate member states; lack of uniform fuel taxes has not impeded progress on fuel economy in the recent past. ACEA is setting itself up for a highly counterproductive adversarial relationship with the EU.
A far better approach would be for ACEA to accept that politicians are not now going to lose face by changing the hard date of MY2012 or the hard target of (130-10)gCO2/km fleet average. There is still substantial leeway in the details, however. For example, there is as yet no agreement as to how the average will be computed (per brand, per corporation, per country, across all LDVs manufactured by ACEA members? What about cross-holdings, such as Porsche's stake in VW?).
If ACEA comes up with intelligent, concrete proposals for mitigating traffic congestion, I expect the EU would be prepared to arrange for e.g. a transition period to help the auto industry meet the new targets. For example, manufacturers could choose to bundle some of their vehicles with electric bicycles or, a coupon for a year of public transportation (redeemable by an immediate relative of the buyer) or, a carbon offset scheme.
Another approach would be to develop a new class of LDV vehicle specifically for high-tech sharecab (aka dolmus or jitney) services. These would be based on mobile data networks and massively parallel compute grids to optimize dynamic routing for large fleets. The drivers would be drawn from the ranks of Europe's unemployed in a public-private partnership. Demand could be generated via bundling with car sales (see above), permission to use special lanes in rush-hour traffic, provision of on-board Internet access etc.
In short, ACEA's members may want to stop thinking of themselves purely as vehicle manufacturers. What they deliver is convenient personal mobility in safety and comfort.
Posted by: Rafael Seidl | 17 May 2007 at 03:57 AM
As much as I tend to be skeptical when I hear automakers say they cannot meet certain standards, in this case I agree that changes in consumer demand are the key. There are plenty of autos out there that meet the proposed standards. Apparently, Europe, like the United States refuses to do what is necessary in this area.
In addition to changes in tax policy, another goal should be to largely ban or seriously discourage autos that don't meet the standards in mid and large cities. This would, in itself, make it safer for the small cars that would be permitted.
How can we expect to proliferate NEVs, for example, if we continue to allow SUVs and trucks in cities that threaten the very existence of small cars and their occupants? I personally have a fairly high risk tolerance but understand the fear factor.
Posted by: tom | 17 May 2007 at 06:33 AM
Ladies and gentlemen......DOWNSIZE YOUR ENGINES!
Posted by: JC | 17 May 2007 at 06:37 AM
Just to focus on CO2 alone may be very limited. If you have smaller engine displacement and run on CNG, you could probably achieve those goals of grams per mile, but is that all that you want?
There are air quality, economic, national security, energy policy and a lot of other factors to consider. Just using CO2 as the measure may be missing the point all together. It could be very costly and still not reach all those goals that you have.
Posted by: SJC | 17 May 2007 at 07:00 AM
The drivers would be drawn from the ranks of Europe's unemployed in a public-private partnership.
I can't think of a better way to encourage people to use public transit than to get the drivers from the dregs of society. What could possibly go wrong?
Posted by: Matthew | 17 May 2007 at 11:05 AM
@ Matthew -
I don't think characterizing all of the unemployed in Europe as "dregs" is fair. Labor markets in a number of countries - e.g. France - are so rigid that both the young and the over-50s find it very hard to get a job at all. East Germany is in even worse shape.
Many recipients of unemployment benefits do have driver's licenses and clean driving records, so if you screen the applicants you should have no problem finding qualified personnel.
Posted by: Rafael Seidl | 17 May 2007 at 12:28 PM
Mr Marchionne ACEA
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