“Global Warming is natural, unstoppable – policies to limit CO2 are pointless and inimical to rational energy policies”  

The European car industry produces some of the most fuel-efficient cars in the world, but the European Union (E.U.) in the name of saving the planet, wants to squeeze out even more, even though this will cost the industry billions, severely distort its ability to make healthy profits, raise the already crippling cost of motoring to the public, and have no discernible impact on the world’s climate.

The E.U. proposed in December that European car manufacturers should be forced to raise fuel economy to an average of about 43 miles per U.S. gallon by 2012. Those that fail would be subject to swingeing fines, with the severity dependent on the degree of failure.

Bear in mind that already, European cars achieve an impressive average 35 miles per U.S. gallon, according to Citigroup Global Markets, compared with about 25 mpg in the U.S. In America, Washington has agreed legislation which will force American cars to match Europe’s achievement today by 2020. GM’s vice-chairman of global product development Bob Lutz said at the Detroit Car Show last month that this will add an average $6,000 to the cost of each GM vehicle sold in the U.S. The E.U.’s new rules would add $5,400 to the cost of a new car, according to European manufacturers, although the E.U. itself estimates the cost at an average $1,900. International debt rating firm Moody’s Investors Service reckons it will cost much less – between $440 and $1,480 per car.

The European Union wants to force the industry to do this because it believes some kind of climate catastrophe will happen if it doesn’t. It’s true that most governments and many scientists believe that climate change is linked to human activity in general and CO2 emissions in particular. But there is also a solid and impressive group of scientists who say this is not so. These dissenting scientists, led by Professor Richard Lindzen of the Massachusetts Institute of Technology, point out that the “consensus” is often led by scientists who aren’t specialists in climate, and rely on computer modelling rather than solid facts to come up with their predictions of doom.

Atmospheric physicist and global warming skeptic S. Fred Singer, founder of the Arlington, Virginia-based Science and Environmental Policy Project (SEPP) said the scientific evidence is clear.

“Is current global warming due to natural or human causes?” asks Singer in a SEPP editorial.

“This crucial question can be settled only by examining the evidence, both pro and con. We conclude that Global Warming is mostly natural – hence unstoppable – and that policies to limit CO2 emissions are pointless and inimical to rational policies to supply low-cost and secure energy.”

Singer co-authored the recent book “Unstoppable Global Warming- every 1,500 years.” 

Cool it
Bjorn Lomborg, Danish statistician and economist, has pointed out in his books “The Skeptical Environmentalist” and his latest, “Cool It”, that many actions suggested by governments don’t make any sense. He doesn’t argue with the theory that humans have made some contribution to warming the climate, but he rails against the conventional wisdom that the consequences will be entirely negative. Lomborg also believes many of the actions being planned to combat climate change are grandstanding, wasteful and counterproductive.

“Global warming is real and man-made. It will have a serious impact on humans and the environment toward the end of this century. Yet, it will have none of the catastrophic, end-of-civilisation characteristics that are so often portrayed in the press,” Lomborg said.

Lomborg said the E.U.’s plan to keep temperature increases to 2 degrees centigrade above pre-industrial levels by the end of the century by slashing CO2 output will cost more than $80 trillion, more than five times the total economic impact of global warming.  

The short-term impact on the European automotive business will be brutal.

Huge financial penalties
Citigroup Global Markets pointed out German automakers like Volkswagen and Porsche face huge financial penalties if the E.U.’s demands are not watered down before the target date.

VW, Europe’s biggest carmaker, faces a theoretical maximum fine if it made no economy improvements of more than $11.5 billion by 2016, according to Citigroup. German sports car and luxury SUV maker Porsche would need to improve its fleet average fuel consumption from its current 20 miles per U.S. gallon to close to 40 mpg by 2012, if it was to avoid fines of more than $736 million by 2016.

Porsche CEO Wendelin Wiedeking wasn’t impressed by the E.U.’s plan.

“The draft put forward by E.U. President (Jose Manuel) Barroso and his Environmental Commissioner (Stavros) Dimas verges on the preposterous. It largely spares the southern European carmakers (small car makers like Italy’s Fiat, France’s Renault and Peugeot) and imposes strict burdens almost exclusively on German manufacturers," he said. Porsche owns just over 30 per cent of VW.

BMW and Daimler face fines of more than $4.3 billion, and they  would have to stop making some of their most profitable models.

The German government reacted with fury to the proposals, and many commentators had assumed that because of the importance of its industry and the clout of its government, the proposal might be rejected. 

Citigroup auto analyst John Lawson said the auto industry was assuming it would be heavily modified.

“We are not so sure,” Lawson said.

“The regulation is troublesome for the high performance, and high margin German business model, whereas some small car makers already have many compliant models,” Lawson said.

Porsche off the charts
BMW, with its policy of “efficient dynamics” has added economy aids like stop-start, regenerative braking, and electric power steering, and has made fuel economy progress. Mercedes is lagging, while Porsche is so bad it is off the charts.

Lawson calculates that even the most modern version of the Porsche Cayenne SUV would have to pay a fine of $26,000 for each sale. Some commentators had expected that because of Porsche’s tie-up with VW, it would be able to somehow average its fuel slurpers into VW’s more fuel-efficient fleet. Not so says Lawson, because VW would first need to earn a CO2 surplus by its engineering efforts, and that is unlikely.

European parliamentarians acknowledged last month that the Commission’s proposals might be a bit over the top, and suggested a mild abatement – delay the new rules until 2015 from 2012. But they also suggested the average should be tightened in 2015.

But the Commission isn’t likely to budge.

Environmental groups want action against the car, and are exasperated by what they consider German shilly-shallying.

Friends of the Earth and Greenpeace reckoned the manufacturers were being let off the hook. Brussels-based Transport and Environment (T&E) was incandescent.

Aat Peterse, director of T&E’s clean car programme, said German car makers had been going backwards recently, with Mercedes CO2 emissions up last year by 2.8 per cent. VW’s cars weighed 1 per cent more last year, while chubby Mercedes put on more than 4 per cent.

German engineers can do it
“If you make cars fatter every year you shouldn’t be surprised if they get less efficient. But German engineers are the best in the world. If we said to them make me a car that uses 50 per cent less energy and retains all its other performance characteristics I believe they would say “yes, we can do that”. They need a kick in the (rear) from legislators to get started,” said Peterse.

Peterse was angry about what he called the industry’s exaggeration of the costs of making cars more efficient.

“We know the German government is on the record with ambitious CO2 reduction goals of 30 per cent by 2020; we cannot understand how they think they can do that without being tough on cars too,” he said.

The industry though believes that this is like taking a sledgehammer to crack a nut. Mercedes points out that even if all six and eight-cylinder cars were taken off the market across Europe, this would cut CO2 emissions by only between one and two percent. So the industry will be forced to spend massively, and have its markets distorted and its profit margins decimated, for a barely perceptible gain.

The E.U. commission reckons the CO2 targets will be finally agreed by the end of 2008.

There are no prizes for guessing who will pick up the ultimate cost of all this; the consumer. And they will be more than happy to pay up because this will save the planet, right?