Details matter: The outsized climate benefits of setting annual targets for new cars in Europe

Tracking progress

In a recent blog, our colleague Peter Mock argued that European regulators should set CO2 targets for cars and vans annually, when they propose changes to that regulation later this month, rather than continue to define targets in terms of five-year intervals as they have done until now. Peter highlighted the importance of setting annual CO2 targets from a climate perspective, and also pointed out that interim targets also make for better industrial policy by ensuring consistent scale-up of production of batteries and electric vehicles.

We wanted to expand briefly on Peter’s first point, using recent ICCT modeling of the post-2020 CO2 standards, to quantify just how large the climate benefits of setting annual CO2 targets would be—and how great the negative impacts of persisting with five-year target intervals.

We used the “Moderate Ambition” scenario from our recent modeling—so, a somewhat conservative middle path toward reducing carbon emissions. Whereas the currently adopted CO2 targets for new cars are -15% in 2025 and -37.5% in 2030 compared to 2021 levels, our Moderate Ambition scenario assumes these are tightened to achieve -30% in 2025, -70% in 2030, and -100% in 2035. The “Stepwise” series in the figure below illustrates a worst-case scenario in which the targets are set at five-year intervals and manufacturers wait until the last minute to achieve them. The “Annual” series illustrates a scenario in which the targets are set at annual intervals, incentivizing manufacturers to make steady progress over the next fifteen years. In addition to tightening post-2020 targets, if EU regulators were to set a few interim targets (e.g. 2027) but not annual targets, the resulting fleet average performance would be expected to fall somewhere between these two scenarios.

Figure 1. European average new car CO2 targets under “Moderate Ambition” scenarios with Annual versus Stepwise targets.

Next, we used ICCT’s Roadmap model to quantify the impacts of these Annual and Stepwise scenarios on projected tailpipe CO2 emissions from the EU’s car fleet. The figure below shows the resulting comparison of these emissions estimates with the original “Adopted Policies” baseline in our recent modeling. From a bird’s eye view, as in the first chart, the difference between the Stepwise and Annual scenarios may not seem all that significant. Yet comparing the effect on the cumulative emission benefits of the standards reveals a different story: over the next fifteen years, setting annual instead of stepwise CO2 targets would more than double the emissions benefits of the Moderate Ambition scenario. And because a fraction of cars can remain in the EU fleet for decades (considering intra-EU vehicle trade and older fleets in parts of Europe), the emission differences could persist long after 2035. By ensuring each year’s new car fleet is less carbon intensive than the previous year’s, setting annual CO2 targets could avoid 480 million tonnes of CO2 by 2050 compared to setting the same targets at five-year intervals. That’s more CO2 than the entire EU car fleet emitted in 2019, according to the European Environment Agency.

Considering the rapidly shrinking global carbon budget for limiting warming to 1.5ºC and the outsized impact of the EU’s vehicle fleet, an opportunity to mitigate a year’s worth of emissions by optimizing the design of the CO2 targets for cars should not be neglected. The target intervals will be one of the two or three most consequential details in the proposal and the final regulation, in terms of CO2 emissions.

Figure 2. European car fleet tailpipe CO2 emissions benefits of “Moderate Ambition” scenarios with Annual or Stepwise targets compared with Adopted Policies.