Car CO2 emissions rules negotiation update

The proposal to set limits on CO2 emissions from new cars was the first proposal on which agreement has been reached or - as our press release put it - "the first casualty of the climate package scale-back".

Average EU CO2 emissions limit

The debate over CO2 emissions limits for cars dates back to the mid-1990 and in 1998 car makers mate a voluntary commitment to reduce the average CO2 emissions of new cars in the EU to 120 g/km in 2012. Their abject failure to meet this target led the Commission to propose this legislation, which included an average fleet limit for new cars CO2 emissions of 130 g/km in 2012 (each manufacturer would have individual targets so the effort is shared). This was endorsed by the EP ENVI committee. The Council rejected this throughout negotiations, favouring a Franco-German proposal to phase in the emissions limits gradually across the fleet. The EP finally capitulated with the result that in 2012, only 65% of the EU fleet will have to meet 130g/km limit, 75% in 2013, 80% in 2014 and finally 100% of the fleet in 2015.

This represents a loophole in the EU average car CO2 emissions limit of at least 20 g/km in 2012.

Compliance mechanism/penalties

Non-compliance with the emissions limits is disincentivised by financial penalties. Here again, the Council forced through changes seriously watering down the proposals as endorsed by the EP ENVI committee. A so-called window or corridor of 'flexibility' is introduced, whereby manufacturers that miss their emissions limit by under 3 g/km pay reduced fines: 1 g/km overshoot would only pay €5 per car; 2 g/km overshoot would be €5 per car for the first gram and €15 per car for the second gram; 3 g/km overshoot would be €5 per car for the first gram and €15 per car for the second gram and €25 per car for the third gram. This 'window' or 'corridor' will stay in place through 2018. So, only in 2019 will the full compliance penalty of €95 g/km per car apply!

This represents a loophole of at least 3 g/km until 2019.

Emissions limit for 2020

The EP ENVI committee introduced a binding average CO2 emissions limit of 95 g/km in 2020. This limit was supposed to provide car manufacturers with an incentive to continue improving their fleets. Council was hostile to making any 2020 target binding. While a 95 g/km target is included in the final agreement, it is little more than an aspiration. There are no provisions on how this target would be implemented meaning a new co-decision process would likely be needed after a review in 2013.

Given all the loopholes introduced in the final agreement, it is hard to see how this target will be met. With the phase-in of the emissions limits and the 'flexibility window' for the non-compliance penalties, the EU fleet average limit of 130 g/km will only take full effect in 2019. The idea that the limit would be reduced to 95 g/km the following year seems unlikely. Against this background, it is quite possible that the target would be changed in the review of the legislation.

Eco-innovation
Up to 7 g/km of the CO2 emissions reductions can be delivered through so-called 'eco-innovation' (additional emissions reduction technologies that are not included in the test procedure). This means that manufacturers can overshoot their average CO2 emissions limits by up to 7 g/km if they can claim that this 7 g/km can be made up by 'eco-innovations'. This provision is limited however until the current test cycle system is reviewed so these eco-innovations are included in the procedure.

Representing a loophole of at least 7g/km until the test procedure is reviewed.

Super credits

Cars that emit less than 50 g/km will be allowed to counted more than once as part of a manufacturer's calculations towards their overall fleet limit. These cars will be counted 3.5 times in 2012, reducing each year before the 'super credits' are no longer counted in 2016.

This represents a loophole of at least 2 g/km until 2016.

The overall average EU CO2 emissions limit for 2012 would be only 162 g/km when all loopholes are taken into account. This is higher than the current average emissions of the EU fleet - which stands at around 158 g/km!