Light Duty Vehicles and CO2The Policy Background

Malcolm FergussonSenior Fellow, IEEP

ECCP II ConferenceCO2 and Cars Working Group

24 October 2005

A Brief History

• 1990s: Fuel economy not improving

• 1993: EU ratifies Framework Convention on Climate Change

• 1995: Commission publishes passenger car CO2 strategy• target 120g/km by 2005 (or 2010 at latest)

• 1997: Carmakers threatened with legislation

• 1998/9: Voluntary Agreements with manufacturers’ associations

• 2000: Monitoring Mechanism (1753/2000) established

• 2001: CO2 Labelling required (1999/94)

• 2005/6: Review of Passenger Car CO2 Strategy

The ‘CO2 Agreement’ with Carmakers

• Community target was 120g/km by 2005/2010• Commission negotiated with Associations• Agreement reached on 140g/km

• ACEA by 2008• JAMA and KAMA by 2009• Interim targets 2003/4

• Monitoring Mechanism (1753/2000) established• Annual joint reports and Communication

• Meeting Community target by 2012?• Associations have reported• Now subject to Impact Assessment

Progress to Date

100

120

140

160

180

200

220

1995 1997 1999 2001 2003 2005 2007 2009 2011

Sales year

Sales

-weig

hted

gCO

2/km

ACEA

J AMA

KAMA

ACEAtargetJ AMA/KAMAtargetEUtargetLinear (ACEA)

Linear (J AMA)

Linear (KAMA)

Next Steps with the Agreement

• 120g/km targets now under consideration• ACEA maintains it cannot be done by technology alone - high cost• Alternative of an ‘integrated approach’

• Research for Commission to contribute to Impact Assessment to evaluate:1. Further technical measures for cars2. LPG and CNG3. Taxation4. Labelling5. Eco-driving6. Air conditioning systems7. Vehicle and engine resistance8. Public procurement9. Promoting biofuels10.Extending the system to light goods vehicles

Further Analysis for 120g/km

• Various technical reports produced• Ricardo Carbon to hydrogen roadmaps 2003• Arthur D Little cost analysis 2003• German Aerospace Centre (DLR) 2004• JRC/CONCAWE/EUCAR Tank to wheel report 2003

• Economic and business impact assessment • For European Commission• By IEEP/TNO/CAIR• Used previous analyses on meeting 120g/km

• Further work now ongoing• Integrated Approach in CARS21 WG• Impact Assessment studies • ECCP II LDVs and CO2

What type of Instrument?

• Options reviewed by IEEP/TNO/CAIR • A single limit for all new cars not practical

• Very costly or impossible for a few (excluded from market)

• No effect on the majority

• A number of possible target types• Single emission target, eg 120g/km• Target linked to ‘utility’ of vehicles• Percentage reduction target, eg a 35% reduction for

each manufacturer

• A number of possible instrument types• Fixed emission limit value • A pure bubble concept• An averaging, banking and trading (ABT) scheme

Conclusions of IEEP/TNO/CAIR Study

• Costs to manufacturers €550 – 1000 per car• Of moving from 140g/km to 120g/km• Based on cautious cost assumptions• Significantly less than ADL study

• Assumes no pass-through to consumer

• Flexibility of instrument used is important• Flexibility reduces costs and avoids exclusions• Affects impact on different manufacturers• Also affects ‘fairness’ of measure

• Reduced fuel cost pays for much or all additional vehicle cost• Allows cost pass-through to consumers• Payback improves as oil price rises

Impact of Fuel Price on Consumer Cost

-2000

-1500

-1000

-500

0

500

1000

1500

0.80 1.00 1.20 1.40 1.60

Petrol price [Euro/l]

Net

cos

ts to

con

sum

er [E

uro]

(NP

V: I

R =

5%

)

2008

each car - uniform target

each car - all other targets

per manufacturer - all targets

all cars (trading) - all targets

Source: IEEP/TNO/CAIR

Data: Polk Marketing Systems

CARS 21 – a ‘Sherpa’s View’

• High Level Group addressing auto regulation

• Should conclude in November/December

• Likely to endorse Integrated Approach

• Advocate considering all policy measures in principle

• … but apply ‘policy filters’

• Quantifiable• Bankable• Attributable• Implementable• Monitorable

TNO/IEEP/LAT Analysis

• Research to contribute to Impact Assessment

• Seeking input from Stakeholders• For all 10 measures

• On costs and CO2 reduction potential

• IA2

• An Integrated Approach• … to Impact Assessment

• Work ongoing as part of broader process

Questions Arising

• What sort of target/instrument for 2012 for cars?

• Should light goods vehicles be included?

• What additional measures should be included?

• What other stakeholders?• Oil industry?• Member States?• Others?

• How to monitor progress under IA?

Light Duty Vehicles and CO2The Policy Background

Malcolm FergussonSenior Fellow, IEEP

ECCP II ConferenceCO2 and Cars Working Group

24 October 2005