Dreaming of the slopes in summer . . . : Detailing the EU 2020 CO2 emission regulation for passenger vehicles

Yesterday the European Commission put forward a proposal to amend the existing CO₂ regulation for passenger vehicles by a mandatory 2020 target. (See our policy update here for a full summary.)

The target value itself, 95 grams per kilometer (g/km), was never in question. However, some technical details of the regulatory proposal—the “modalities”—were fiercely debated between various stakeholder groups.

One of these modalities is the slope of the target line. This target line sets CO₂ targets for individual manufacturers, and it is based on vehicle weight. The heavier the vehicle, the more CO₂ it is allowed to emit. How much more is determined by the slope of the target line, the ‘a-factor’. This a-factor has been the subject of heated discussions among European manufacturers over the last couple of weeks.

It should be noted that from a technical perspective vehicle size (length × width) is a better basis for the target line than is vehicle weight. As we’ve outlined in detail elsewhere, the main reason is that a weight-based target system discourages the use of light-weighting, while a size-based target system is technology neutral. Nevertheless, the regulatory proposal put forward by the Commission remains based on vehicle weight.

The original proposal by the European Commission, prepared under the direction of Commissioner Connie Hedegaard in mid-June, set ‘a’ as 0.0296. This is equivalent to a so-called 60% slope based on the 2009 EU new vehicle fleet. To illustrate what this means, one needs to draw a cloud of data points for CO₂ vs. weight for the European passenger vehicles sold in 2009. The sales-weighted regression line of this data cloud then essentially gets rotated around a set pivot point (in this case, 95 g/km) until it is only 60% as steep as the original regression line (see the chart below). This rotation of the line is done to a) achieve a fair distribution of the efforts to be made by different manufacturers, and b) to curb “gaming” by avoiding incentives to increase vehicle weight.

In response to the original European Commission proposal, the German manufacturers’ association (VDA) came forward with a counterproposal which would have set ‘a’ at 0.0457. This corresponds to a steeper target line, more like a 95% slope based on the 2009 EU new vehicle fleet.

Finally, a few days before the final adoption of the proposal, the European Commission put together a revised compromise proposal, with ‘a’ set at 0.0333, which corresponds to a slope of about 70% based on the 2009 fleet (or 60% of the slope of the 2006 fleet average line).

It is important to understand that the debate around the a-factor is mainly about burden-sharing among manufacturers. From a technical point of view it is crucial to ensure that the weight-based target line does not become too steep, in order to prevent artificial incentives for increasing vehicle weight. Yet whether or not the 95 g/km target is reached on average is independent of the a-factor. At the same time, the factor does affect the individual targets for manufacturers, as this table illustrates.

The European Commission proposal, now adopted, requires the same percentage CO₂ reduction (27% from 2015 to 2020) from each manufacturer. The absolute emission targets of course are different: for example, 101 g/km for BMW and Daimler vs. 87 g/km for Fiat. The original Commission proposal allowed for slightly higher emission targets for manufacturers of lighter vehicles (for example Fiat, at 88 g/km) and demanded lower emission targets for heavier vehicles (BMW and Daimler. 100 g/km). The VDA proposal, with its higher slope, would on the other hand have allowed premium manufacturers to emit more CO₂ (BMW and Daimler 103 g/km) while manufacturers of smaller vehicles would have had to reduce more (Fiat 84 g/km). It is interesting to note that for the majority of manufacturers the slope parameter has no impact, as their fleets are quite similar to the EU average, the pivot point used to rotate the initial target line.

The differences between these proposals may seem minor, until one recalls that a manufacturer has to pay a penalty of up to €95 for each gram by which it misses the target for every vehicle it sells. Those g/km add up. This explains the fierce debate on this issue that we have witnessed during the last few weeks in the media (see, for example, here and here), and why it took the Commission longer than expected to come forward with a final proposal. But they have managed—just in time for the summer break in Europe.