## European Commission Proposes Legislation Limiting CO2 Emissions From Cars; Fines for Missing the Target

##### 19 December 2007

The European Commission today proposed legislation that would begin implementing an integrated approach to reducing the average CO2 emissions of new passenger cars to 120 grams per kilometer by 2012. The current average is around 160 g/km.

Under the proposal, vehicles will need to reduce average emissions to 130 g/km by 2012. The remaining 10 g/km will come from complementary measures including efficiency improvements for car components with the highest impact on fuel consumption, such as tires and air conditioning systems. The Commission intends to come forward at a later date with proposals for efficiency requirements for such components and the carbon content of road fuels, notably through a greater use of biofuels.

(The target of 130 g/km works out to approximately 42 mpg US for a gasoline car and 48 mpg US for a diesel car, using the carbon balance values used by the US EPA in its calculations.)

The draft legislation defines a limit value curve of CO2 emissions allowed for new vehicles according to the mass of the vehicle. The curve is set in such a way that a fleet average of 130 grams of CO2 per kilometre is achieved.

A manufacturer must ensure that by 2012 measured fleet average emissions are below the limit value curve, when all vehicles manufactured and registered in a given year by the manufacturer in question are taken into account. This means that the level of emissions by heavier cars will have to be improved proportionately more than lighter cars compared to today. Manufacturers will still be able to make cars with emissions above the limit value curve provided these are balanced by cars which are below the curve as long as the fleet average remains at 130 grams. Manufacturers’ progress will be monitored each year by the Member States on the basis of new car registration data.

The proposal will provide manufacturers with the necessary incentive to reduce the CO2 emissions of their vehicles by imposing an excess emissions fine if their average emission levels are above the limit value curve. This fine will be based on the number of grams per kilometer (g/km) that an average vehicle sold by the manufacturer is above the curve, multiplied by the number of vehicles sold by the manufacturer. A fine of €20 (US$28) per g/km has been proposed in the first year (2012), gradually rising to €35 (US$50) in the second year (2013), €60 (US$86) in the third year (2014) and €95 (US$137) as of 2015. Most manufacturers are expected to meet the target set by the legislation, so significant penalties should be avoided.

Under the legislation, several manufacturers will be able to group together to form a pool which can act jointly in meeting the specific emissions targets. Manufacturers in this pool will be required to abide by the rules of competition law.

Independent manufacturers who sell fewer than 10,000 vehicles per year and who cannot or do not wish to join a pool can apply to the Commission for an individual target. Special purpose vehicles such as those designed to accommodate wheelchair access are excluded from the scope of the legislation.

The proposal will now be communicated to the Council and to the European Parliament as part of the co-decision legislative procedure.

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Finally! I hope this EU proposal passes mostly unscrathed into an EU regulation...

And I wonder how soon the car manufacturers will bring inital "breakthrough" developments, slumbering in some vault for years past, to the market. I'd guess it's possible within one product-cycle, ie. 3-4 years from now (2011) to boost the average engine efficiency by the necessary 15-20%.

With 10-year old technology it was possible to boost the efficiency by 25-30% (Prius)...

On the other hand, combining this with the "added cost" imposed by the regulation, the profit shares won't be affected, as a good scape-goat has come forward to attach an even heftier price to cars sold in the EU, as compared with other large regions (US, JP - the typical price for cars, adjusted by the spending power, is 15-30% below that of cars in the EU for some reason, despite the rather lax smog emissions regulations).

I don't think we need to wait a very long time to see further improvements in CO2 emissions from the French, Italian and Japanese manufacturers. An agreement was signed in Europe in 1998 to bring average emissions down to 140 g CO2/km. Peugeot-Citroen, Fiat-Alfa-Lancia and Renault-Nissan already had 142, 144 and 147 g in 2006 (in other words, basically two years ahead of schedule).

The German cars, at around 190 are a different story. Despite churning out a new green prototype every week, the German average has actually worsened in recent years. The main focus seems to be on anti-environmental campaigns. For example, the EU 120 g proposal was watered down to 130 and postponed just a few eeks ago because of Angela Merkel and the German car groups.

I doubt, in this situation, the Germans are going to get their way. The penalty system has yet to be decided, but everyone in the EU has a CO2-based tax in place for 2008 (i.e. which starts in a few days). Everyone, except Germany, that is. In all cases, the tax is based on CO2 and not the weight of the car (just like Tokyo looks at absolute CO2 figures. Should one be in a real need for a larger car, there are plenty of larger cars with small CO2 figures)

I doubt the EU will water down the CO2 system and go against the nature of all the national CO2 systems (except Germany), if it's just to appease the Germans.

Think of it like this: the French and Italians mostly produce small, cheap cars. These are close to or at the limits already and will probably get there OK.

The Germans produce larger, higher performance expensive cars. Although they have further to go, they have more budget to do it with.

All they need it to market the fact that their cars are (will be) incredibly low CO2, in the way that they market their high (and mostly pointless) performance now. If they keep up the pressure, they should be able to do it in 1 or 2 generations.

Diesel, lightening and some form of hybrid should be enough, perhaps with low rolling resistance tyres, and perhaps some top speed limiting.

All the solutions are there, it is a matter of packaging them at the right price that people can and will buy.

Time to invest in the EU model. Less pollution = healthier people = happy people.

The German cars are sold at a premium, but this doesn't mean they are high performance. Take for example the Smart, where sales have fallen in Europe by 33% in Europe since 2005 (www.acea.be).

Performance for most people is a combination of CVs, fuel-economy, Euroncap rating and of course cost. Of these factors, the fuel-economy-emissions duo is at the forefront of people's minds in Europe given the numerous costs (not just petrol) associated with inefficient (i.e. German) cars. VW produces cars like Peugeot-Citroen, Fiat-Alfa-Lanca or Renault but the CO2 average is more than 20g (166) more than the French and Italians. The Germans are very good at making the latest cup-holders but they should try to copy (a bit like Mclaren and Ferrari in F1) the efficient Multijet and HDi engines from the French and Italians. The efficiency of these engines not only allows for better fuel-consumption and emissions, but they also allow for engine down-sizing.

Look at these performance figures:
AUDI A3 2.0 TDI
149 g/km CO2
average fuel consumption 5,7 l/100 km
140 bhp
30000 euros (you must be kidding)
EURONCAP 4 stars (score of 29)

CITROEN C4 2.0 HDi
142 g/km CO2
average fuel consumption 5,4 l/100 km
136 bhp
24300 euros
EURONCAP 5 stars (score of 35)

Despite losing out in all performance figures (ie.e low performance), we're talking almost 6000 euros difference here. A similar comparison can explain how Smart has dropped by 33% since 2005. It achieved with the 1200cc engine and a tiny chassis the same fuel economy as a Citroen C1 or Fiat 500, but of course doesn't have the same CV or safety features (seven airbags for the 500 and 5-star euroncap) despite costing a lot more!

In principle, regulating CO2 emissions from cars is a sensible step toward reducing the EU's dependence on Russian and OPEC oil. Of course, it would be undiplomatic to say so out loud, especially given the strained relations between Russia and its former satellite states who all still depend very heavily on oil from that one supplier. Couching the effort in terms of climate change sidesteps this and also pushes emotional buttons in voters' minds that a rational energy security argument cannot reach.

Experience has shown that consumers will not pay a hefty premium for fuel economy as long as there is no coercion to do so. Even in Europe, fuel savings alone do not offer sufficient rational incentive. The benefits accrue in large part to society as a whole, therefore no-one wants to be the sucker that pays more for less (performance, luxury etc.) just so their next-door neighbor can park a brand-new SUV on his driveway. This is exactly analogous to the introduction of emissions control equipment.

However, the EU's current proposals are unsatisfactory in one key aspect: they completely ignore the total number of km any individual vehicle actually covers in any given year. In terms of total annual CO2 emissions from operations, driving a car rated at 120gCO2/km for 15.000km is equivalent to driving one rated at 240gCO2/km for 7.500km. In principle, there is nothing wrong with owning a gas guzzler as long as you don't drive it a lot. Many seniors want the luxury and safety of larger, heavier models yet they no longer drive nearly as much as younger drivers who still need to commute to work everyday.

Indidividual consumers would be given an annual CO2 emissions "budget" of 120g/km * 15.000km = 1800kg of CO2 times the number of vehicles they own. If they exceed their budget, they would have to cover the balance with emissions certificates bought on a newly created retail market or else, pay a fine high enough to have a measurable effect on vehicle purchasing patterns. In Europe, it would be easy enough to base annual vehicle license fees on both the official CO2 emissions ratings and odometer readings. Assuming odometers can be made sufficiently tamper-proof, cheats would be caught during their next government-mandated technical check-up (called Hauptuntersuchung in Germany, MOT in the UK, etc.)

The key difference is that the responsibility for cutting CO2 emissions in the road transportation sector would shift to the individual consumer/voter. The auto industry would merely respond to changing consumer demand as and when that occurred, rather than artificial hard regulation by a specific date.

@ Karl-Uwe -

(a) the German manufacturers taken together are at roughly 160gCO2/km today, not 190. Mercedes and BMW each come in at around 185, though.

(b) the only reason Germany does not yet have a CO2-based annual vehicle license fee is that this particular tax is levied by the states, so the federal government had to negotiate a solution with them to implement the related EU directive. The cutover to the CO2 basis is expected for 2008.

(c) the smart fortwo used to have a 700cc I3 engine, in the newset model that was raised to 1000cc I believe. Small displacements per cylinder tend to be less efficient because of high heat losses to the coolant. Sales have dropped off because the basic design is fairly old and the product quite expensive. Besides, the market for two-seater city cars is fairly saturated in Europe. This one model is not the measure of things when it comes to low emission vehicles produced in Germany.

(d) what is true is that the German premium brands have called in every political marker to water down the EU proposal, because it hits their profit models hardest. The issue is that ACEA's voluntary commitment had required a 25% cut in CO2 emissions from each manufacturer, preserving the dominance of German car makers in the lucrative premium segment. The original target of 140gCO2/km by MY2008 never applied to any individual brand or manufacturer but rather, to the sales-weighted total fleet produced by all ACEA members.

Their French and Italians competitors had entered into this voluntary agreement only because they didn't have much in the way of premium models and, because even they preferred not to have any regulation at all. Now that the EU is setting an absolute rather than a relative target, they are using the process to gain a competitive advantage. Note that the new rules permit individual manufacturers to pool their sales-weighted emissions.

In other words, Porsche can pool its models with VW AG's, which includes Audi. Mercedes and BMW could in theory pool theirs with Citroen PSA, Renault and Fiat if an agreement to that effect could be hammered out. Volvo and Saab fall under the corporate umbrellas of Ford and GM, respectively.

Herr Seidl,

"In principle, there is nothing wrong with owning a gas guzzler as long as you don't drive it a lot." The EU states (with the exception of Germany) have already implemented CO2-based taxes which never take into account the idea that "but I'm hardly going to use it...". This isn't logical and is also impossible to implement.
The rules are already likely to exempt those cars that are made at less than 10,000 units. This is already a bigger exemption than I like but I guess it follows that if one is going to e.g. develop street versions of cars with F1 technology then, provided the numbers are very limited, the harm is also limited.

There is no F1 technology to be developed for SUVs or execs, and with the unit numbers we are talking about in this case, there is PLENTY of harm to be done.

(a) 160? You are confusing the overall European average with the average of German cars which is 173 g CO2/km for 2006:
http://www.transportenvironment.org/docs/Publications/2007/2007-11_car_company_co2_press_release.pdf

Even without checking, this should have been immediately apparent. If the averages are VW 166, BMW 184 and Daimler 188, then surely it makes no sense to state that their average is 160 ?

(b) This is absolutely false. In Italy the "regioni" have competence in car tax as do the "regions" in France. The case for "autonomias" in Spain is even more complex yet Spain was the first to implement their CO2 tax. All these countries have already implemented their tax as well as Finland, Belgium, Cyprus, Ireland etc etc etc. The Irish probably have the best of all systems as they really go out and punish those people who are causing the problem, the buyers of SUVs (i.e. German vehicles)

The reason Germany is left as the only country in Europe without a CO2 tax is that at 173 g, they are not going to be able to honor the 1998 agreement they signed for 140, let alone a target of 120. In other words, it is painfully obvious to see that that the economic fears of the car makers are the reason for the procrastination and not the states. When Merkel blocked the EU CO2 proposal of 120 a few weeks ago, the pressure came from the car lobbyists, not the states (please check the world press on this point).

According to deutsche welle, the plan is to PERHAPS do something in 2009:
http://www.dw-world.de/dw/article/0,2144,2912535,00.html
"IF approved by Germany's state governments in early December, the tax exemption would apply to vehicles admitted as of Jan. 1, 2009."

(c)
Absolutely the opposite. The Fortwo diesel has gone from being a 1200 cc to an 800 cc engine (petrol versions are the same). The 1200 version was worse than the larger Citroen C1 and Fiat 500 in fuel efficiency, emissions, safety AND price (talk about wanting to take it all) and this is what caused the slump. The new version is much more efficient and may reverse the trend. The problem is that at 800cc we're basically in the motorcycle class (the class you can drive without a permit) and it's even less practical as a car than its predecessor, so there is no guarantee of this.

(d) So the Germans did NOTHING since 1998 (they've actually worsened in recent yeas) because they knew the French and Italians, already at lower levels (i.e. with less margin for improvement), were going to do all the work? I expect the producers of efficient cars will pool their cars at a premium price, but honestly, if all they can do is make monstrous SUVs with the very latest cup-holders, they perhaps should focus on making tanks or something. Alternatively they should try to copy the HDi and Multijet engines (a bit like Mclaren Mercedes from Ferrari in F1 this year) from the Italians and French. Perhaps it isn't too late.

If the new progressive tax/free-bates CO2 based registration fees/tax being introduced in France was implemented across EU, fleet average would quickly go below 100 gr/Km.

If many Germans want to pay an extra $10K a year (or progressively much more) to continue to drive higher performance gas guzzlers, should they be allowed to to it? If the$10K/year paid by every gas guzzler user allow one more older ICE vehicle to be removed from the roads (and replaced with e-cars), the net result would quickly become very positive.

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