What does EU’s tough talk on CO2 mean for fleets?

Car manufacturers selling in Europe will soon face massive fines unless they can get their average CO2 emissions down to 130g/km by 2012. Given that many of them are currently nowhere near that average, the future looks worrying. However, the complex draft EU legislation does contain some chinks of light, as the answers to some key questions reveal.

What is the EU’s objective?

To help cut greenhouse gas emissions and meet its Kyoto Protocol targets, the EU agreed that average emissions from new passenger cars should not exceed 120g/km CO2 by 2012.

Hold on a minute; I thought the target was 130g/km, not 120g/km?

The 130g/km figure is the new target for car makers. The EU envisages a further 10g/km reduction via fuel suppliers (including an increase in biofuel use) and tyre makers to reach an overall 120g/km average.

Why is the EU proposing legally binding fines now?

The current fleet-car CO2 average – based on 2006 figures – is about 160g/km. Given this figure and current estimates, the car industry will fail to meet its own voluntary CO2 targets, set back in 1998, of a 140g/km average by 2008 (for European manufacturers) and 2009 (for Japanese and Korean car makers). Thus the EU decided it needed to propose legislative fines for non-compliance with the 2012 target.

How will the new system work?

You might have heard talk about a ‘limit value curve’ methodology for permitted CO2 emissions according to the mass (ie weight) of the vehicle. This is a bit confusing because:

a) The curve – the lower blue dotted line on the graph (see right) – is actually a straight line.

b) Although the legislation says car emissions must be below the curve, manufacturers can still make vehicles that sit above the ‘curve’ as long as they also make ones that sit below it too. Ultimately the key aim is an overall 130g/km CO2 average.

What happens if car makers fail to meet the targets?

They will be heavily fined. The EU is suggesting a 20-euro (£14) ‘penalty premium’ for every g/km over the agreed 130g/km average multiplied by the number of vehicles sold. The penalty would rise each year in increasing increments to 95 euros (£68) per g/km by 2015. This could easily run into billions for some makers, although the EU hopes the fines will be high enough to promote change rather than a revenue stream.

Will new cars get more expensive as a result?

Yes. But hopefully only because of the new technologies added to meet the emissions target rather than from fines for non-compliance passed on to the consumer. The EU suggests average purchase prices may increase by up to 6% but says the associated fuel savings will offset the cost.

Is the legislation retrospective?

No. It will only apply to new vehicles (cars and vans) launched from 2012.

Will heavy, powerful, 4×4 or luxury cars exist after 2012?

It will be tough, but as the legislation is weight-based, makers of heavier cars will not have to get to a 130g/km average – which equates to an average car weight of about 1400kg. They will just have to duck under their weight-based part of the ‘limit curve’ (see table, right). Porsche, for instance, has been given a target of 144g/km and BMW 137g/km, not 130g/km.

To make these tough targets possible – Porsche has still been set a massive cut of 138g/km – the EU is allowing ‘CO2 pooling’ between makers. This could see Porsche group together with the lower-emitting VW group, in which it has a major shareholding, and other currently higher-emitting car makers – such as BMW and Mercedes – looking to buy ‘carbon credits’ from lower-emitting ones like Peugeot or Fiat.

What about smaller car makers who can’t forge such alliances?

Manufacturers selling fewer than 10,000 vehicles per year in Europe – such as Aston Martin – can instead apply to the Commission for an individual target.

What happens next?

The draft regulation – announced on 20 December 2007 – will now be discussed by the European Council and European Parliament. In the course of the debate, some car makers (a BMW spokesman has already branded the plans “unrealistic”) will be vying with eco groups, who think the legislation doesn’t go far enough. So, given the controversial nature of the proposals, the discussion could run for years and the legislation may not get through. But if it does, don’t bet against these proposals making it through largely intact. They can then be adopted directly without the need for national laws. By 2012 fleets can expect pricier, but more fuel-efficient, vehicles of all shapes and sizes.