Future CO2 targets for cars: the economic and social dimensions

Last year, passenger car sales grew by 3.4% – bringing the total number of cars sold in the EU to 15.1 million. This is a significant milestone as the symbolic 15-million mark was passed for the first time since 2007. Indeed, the European automobile industry is on a pathway to recovery. But even as we are coming close to pre‐crisis figures again after a full decade, the situation remains fragile.

Message from ACEA's Secretary General - February 2018

As we embark on the year 2018, it is crucial to maintain this trajectory of recovery within Europe, as well as safeguarding our competitiveness on the global level. This is all the more important as we now face new CO2 targets for passenger cars and vans. Late last year, the European Commission presented its proposal for post‐2021 CO2 reductions – legislation that will have a major impact on the future of the European auto industry. From our side, ACEA members are fully committed to further reducing CO2 emissions from their vehicles, spending a large part of the sector’s €50.1 billion annual R&D investment on decarbonisation.

As part of the move towards low- and zero-emission vehicles, Europe will also need to address its impact on jobs across the value chain. Electric powertrains, for example, have much less moving parts than the average combustion engine; their production does not only require different skills but also less manufacturing labour. Of course, the transition to low-carbon mobility will also create new jobs (for example in charging infrastructure and batteries), but in most cases these jobs will be created for people with other skills or located in other places (also outside the EU) than those working in automotive manufacturing today.

That is why future CO2 targets should be accompanied by appropriate strategies to anticipate and manage this change in a socially-acceptable way. How deep and abrupt this structural change will be, will largely be defined by the ambition level of future targets. Although ACEA welcomes the fact that the date for the long‐term CO2 targets has been set for 2030, the ambition level of the Commission’s current proposal is too aggressive to guarantee a gradual transition. The 30% target proposed for 2030 simply goes beyond what was agreed by heads of state under the EU Climate and Energy Framework to meet the COP21 objectives.

Moreover, the proposal for an additional 15% reduction target already in 2025 is simply too much, too soon. Coming just four years after the CO2 targets already set for 2021, it will leave hardly any time for our industry to make the necessary technical changes to vehicles. Indeed, overly-aggressive targets will put the global competitiveness of the European auto industry at risk. Policy makers, both at EU and member-state level, must be aware of the social implications that their decisions on post-2021 CO2 targets will have.

Regardless of what the ambition level will be, achieving future CO2 reductions will strongly depend on a much higher uptake of alternatively‐powered vehicles. And this will only happen with an EU‐wide roll‐out of recharging and refuelling infrastructure, as well as harmonised incentives to stimulate customers to buy such vehicles. Particularly when we see the low and fragmented market uptake of alternatively‐powered vehicles across Europe today, we believe that the Commission’s CO2 proposal needs to be examined very carefully by all policy and decision makers.

One important message we have for them is that, when it comes to decarbonisation, it is the results that should matter, not the technological pathway that a manufacturer chooses to deliver them. In other words, policy makers should of course fix ambitious objectives for CO2 reductions, but they should not impose the technology choice – that would only stifle innovation.

Unfortunately, we believe that the current CO2 proposal is not fully technology‐neutral. By setting a benchmark for ‘low‐emission’ vehicles, the Commission aims to promote the uptake of alternative powertrains. The benchmark approach, as such, could be the right way forward – but not in its current shape. Because of the method of calculating the benchmark, it effectively pushes for pure battery electric vehicles, and does not sufficiently reward other alternatives, such as plug-in hybrids.

Despite the industry’s major investments in electrically-chargeable vehicles and ongoing efforts to expand the offer, electric cars still only account for less than 1.5% of total EU sales. Moreover, their market share has remained rather stagnant so far; growing by just 0.8% between 2014 and 2017. When we consider that the market uptake of electric vehicles is directly correlated to GDP per capita, affordability is a major barrier.

The fact that the market share of electrically‐chargeable cars is practically zero in EU countries with a GDP below €17,000, says it all. As you can tell, the transition to low- and zero-emission vehicles will not happen overnight. A forced push for electrification, and any limitations or bans on the internal combustion engine, must be avoided as it would have negative implications for both consumers and society.

As an industry we are fully committed to decarbonisation, but we can only do that with respect for our customers’ needs as well as the 12.6 million workers we employ directly and indirectly across Europe. A thriving, profitable business is a pre‐requisite for sustainability. After all, we want to make sure that we can produce clean vehicles that our customers want and can afford to buy.

To that end, Europe will need an ambitious – yet realistic – CO2 strategy; with a well‐balanced and coherent strategy for managing the gradual shift to low-carbon mobility. Policy makers really need to take a 360‐degree view of the impact of post-2021 CO2 targets, including the economic and social dimensions.

Erik Jonnaert
Secretary General of ACEA