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EuroAuto: The Environment Heats Up In Europe

The European Commission recently announced some proposals that could soon ultimately lead to the demise of anything larger than the four-cylinder engine in Europe.

For many years the carmakers in Europe and Brussels, home of the unelected commissioners who increasingly rule every aspect of life in Europe, have had an uneasy relationship which has been exacerbated over the last few years with the advent of climate change. The finger of blame points unerringly at the carmakers for having the audacity to produce vehicles that pollute the planet. As a result, every commissioner who takes office feels obliged to roll up his or her sleeves to take on the industry that has become the politicians’ punch bag. The carmakers, through the ACEA, the association of European car manufacturers, try to respond in a responsible fashion. Ten years ago, for example, its members signed a voluntary agreement to contribute to the European Union (EU) Kyoto protocol objectives that led to reduced carbon dioxide (CO2) emissions from cars by an average 13%, according to an EU monitoring report in 2004, the last year such figures were researched. The average CO2 emissions of new vehicles sold in Europe was then and remains around160g/km.

However, these results could have been better, argues the ACEA, had there not been the counter-productive effect of competing EU regulations, a weak demand for fuel-efficiency and consumer preference for larger and safer cars. “Cars have become heavier and larger within their own different model segments, due to regulations on safety and air quality, and due to consumer preferences,” says an ACEA report. “Buyers have opted for larger and safer cars, due to factors such as an increasingly dense traffic, changes in lifestyle, demographic trends and driver physique. 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.” The ACEA also claims that the auto industry has been unfairly singled out. In the original proposal, the auto industry was but one of three “pillars” in reaching the 120g/km target, the other two being taxation and information through “labeling” that would help shape consumer demand for fuel efficiency to reach the 2012 political objective. However, says the ACEA, these last two policy instruments were never properly implemented and therefore did not produce any results, to the detriment of the achievements of the car industry which did deliver significant CO2 reductions.

The new proposals put forward in late December ’07 build upon those originally mooted in February ‘07 to bring the average down to 130g/km by 2012. The difference then was the Commission stopped short of translating them into concrete measures whether it was for individual vehicles, manufacturers or member states. However, as a concession to the automobile lobby for the new hard line it is pushing, it has said that cars over two tonnes will still be allowed to emit more than 150g/km.

The Commission is yielding quite a big stick, though, and is pushing for penalties for non-compliance being as much as $140 per g/km over the limit, penalties that will apply to every carmaker selling vehicles in the 27-nation bloc. According to the ACEA, this is an unfair burden as it represents a carbon price 14 times higher than that applied to other industries through the European emissions trading scheme. It will result, says the ACEA, in an average price increase of $4,400 per car. However, this figure is questioned by the Commission which in an impact assessment report has said that the new rules would entail an average increase in car prices of $1,900, but which would be offset by average fuel savings of roughly $4,000 over the car’s lifetime. Whatever the final figure, the ACEA argues that it will be virtually impossible to pass these additional costs wholly onto the consumer because of the fierce competition within Europe and abroad. It claims that European manufacturers will consequently be forced to look for cost cutting in their production, which could lead to a relocation of manufacturing outside Europe and a loss of jobs in the EU. From the consumer point of view, cars could become unaffordable with the resulting side effect being an even slower renewal of the existing car fleet on Europe’s roads, which would be detrimental to improving the environmental performance of road transport.

Until now, the German carmakers that have the most to lose as the manufacturers of large cars have been positive in their reaction to the various proposals, responding with technology such as stop-start systems and producing very economical diesel and hybrid models. However, they are now putting up a fight as they perceive that their response to date has not been acknowledged in Brussels and that their very future might be at stake. The worry is that the Commission will not stop with the 130g/km but might even be tempted to put a cap on CO2 output with figures like 200g/km or 250g/km being mentioned. If this were the case, it would spell the end for such cars as the BMW M5 which emits 357g/km. BMW, whose average CO2 emissions was 192g/km in 2005 as calculated by the German Federation for Transport, has now gone so far as to issue a statement saying that the proposals were “naïve” steps that would distort the market in favor of small cars. The cudgels have also been taken up by the German government with Sigmar Gabriel, the German Environment Minister, often a backer of EU green initiatives, calling it a “competition war” against the German car industry to benefit French and Italian rivals. Interestingly, though, the French have complained that the Commission has let the makers of heavier, more polluting vehicles off too lightly by varying the emission target according to the weight of the car.

EU environment commissioner Stavros Dimas is resolute in his desire to push the regulations through, though, saying: “Passenger cars account for about 12% of overall EU carbon dioxide emissions and emissions from transport are continually increasing. The aim of the legislation is to reduce CO2 emissions from cars in order to help fight climate change.” Whether the consumer can be persuaded to forego the big car for a less powerful small one remains to be seen. In a recent survey in the UK, conducted by the Society of Motor Manufacturers and Traders, first in the buying consideration was price followed by the specification. Emissions output was placed sixth on the list. 

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