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E.U. CO2 Plan Relieves Industry, Infuriates Environmentalists

E.U. CO2 Plan Relieves Industry, Infuriates Environmentalists.

Watch Out For City Action Across Europe To Force Green Agenda.

“The Commission has gifted the car industry an ineffective regulation after they came calling”

“Our first reaction is that it could have been worse for the auto industry”

Auto manufacturers were breathing a sigh of relief after the European Union proposed cutting average vehicle carbon dioxide emissions 30 per cent by 2030, compared with 2021.

The industry had feared much tougher rules with bottom line-attackers like the imposition of an artificial sales mandate for electric vehicles. In the event, industry analysts weren’t fazed by a target that 30 per cent of all new car sales should be zero emission by 2030. They were pleased there were no electric car quotas, nor limits on life-cycle emissions or rules on decarbonisation of electricity.

But the fear is that although the industry may have been given a relatively easy ride by the E.U., there might be a rearguard action from cities using the legal system to ban non-electric cars from city centres, or impose swingeing taxes on car use or gasoline.

Brussels-based environmental lobby group Transport & Environment (T&E) said it was all a stitch up in favour of the Germans, and undermined climate change goals.

“The European Commission’s announcement of CO2 targets for cars and vans today is a gift to Europe’s carmakers and fails to tackle the E.U.’s biggest climate problem, transport,” T&E said in a statement.

The Commission is the E.U.’s executive. Its plans are submitted to the nation states for approval with some input from the European Parliament.

T&E welcomed the 30 per cent zero emission sales target but said without sanctions, it would be ineffective.

“The rules were weakened at the last minute following a call between (E.U. Commission) President Junker’s office and Matthias Wissman, head of the German car lobby association (VDA),” T&E said.

Citi Research, in a report headed “E.U. Gives Industry a Break”, said the 30 per cent  cut in CO2 emissions by 2030 with a 15 per cent interim one by 2025 looks like a gift to the industry.

The Commission said this proposal will cost the industry €1,000 per car by 2030 and €900 for vans.

“To meet 2021 targets, fleet CO2 emissions need to improve 5.1 per cent a year (2015-2021), but under these proposals that rate is 4 per cent per year 2022-25 and 3.8 per cent 2026-30,” Citi Research analyst Michael Tyndall said.

Tyndall said the proposals are now open for discussion, but history suggests any changes are usually to make them easier rather than tougher. He noted the lack of quotas for battery electric vehicles and pointed out that the Commission assumes 80 per cent of new cars sold in 2030 will have an internal combustion engine (ICE).

Although this reaction suggests auto makers might be off the hook, it’s not just the E.U. they have to worry about. There is a burgeoning movement across Europe for cities to use the legal system to force their own rules on cars. T&E said this was now more likely.

“As as result, E.U. countries will have to resort to much more difficult measures such as restricting traffic, banning combustion cars or very steep fuel tax increases,” T&E said.

Investment researcher Jefferies agreed that the proposals were positive for the industry.

“Our first reaction is that it could have been worse for the auto industry. New E.U. CO2 targets are undoubtedly challenging but seem to be a reasonable continuation of the current process and (manufacturers) strategies,” Jefferies analyst Philippe Houchois said.

Electric bias
“Although there is no prescriptive approach forcing (manufacturers) into technology choices, there is a clear electric bias. Manufacturers selling zero emissions and low emissions – up to 50 g/km – in excess of 15 per cent of volume by 2025 and 30 per cent by 2030 will benefit from less stringent but unspecified CO2 targets. We view this as a benefit to manufacturers that would pursue a duel strategy – high CO2 ICE and high EV – particularly German premium brands and Ferrari possibly,” Houchois said.

The European Automobile Manufacturers Association, known by its French acronym ACEA, didn’t like the idea that there was an interim hurdle to reach by 2025 and would have preferred just a 2030 target. It felt the 30 per cent target for 2023 was “overly challenging” and would have preferred 20 per cent which it considered “to be achievable at a high, but acceptable cost”.

ACEA Secretary General Erik Jonnaert said it was all very well wanting more alternative powered vehicles but there weren’t many available to buyers.

“Clearly CO2 targets can provide an impetus for innovation in the auto industry, but the current proposal is very aggressive when we consider the low and fragmented market penetration of alternatively-powered vehicles across Europe to date,” Jonnaert said.

According to Automotive Industry Data, battery-electric car sales amounted to 0.9 per cent of the Western European market in the first 9 months of 2017.   

More recharging
“Europe needs much more investment in recharging and refuelling infrastructure, before we can expect consumers throughout the entire E.U. to embrace such vehicles,” he said.

T&E said the lack of action from the E.U. would be a gift to China’s electric car makers, but the battle wasn’t over yet.

“The Commission has gifted the car industry an ineffective regulation after they came calling. Removing the penalty for failing to meet zero-emission vehicle targets is an own goal. It amounts to handing the global leadership on electric cars to China, which will be delighted to export their models to Europe, jeopardizing jobs in Europe’s auto industry,” Greg Archer, clean vehicles director at T&E said.

“The car industry may be leading at half-time but the game isn’t over. It is now down to member states and Parliament to make changes to the proposal in order to put Europe on a trajectory to clean up cars and vans and make its auto industry globally competitive. Regrettably, the Commission has failed to do either or learn from past mistakes,” Archer said.
The proposal will now be considered by the nation states and European Parliament before a final compromise is struck in early 2019.


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