CO2 Emissions from New Cars in Europe: Post-2020 Regulations and Challenges

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By Stéphane Amant, Senior Manager in charge of the Mobility Division

The European Parliament has adopted the post-2020 CO2 target for cars. This will entail a 37.5% reduction in CO2 emissions for new cars [1]. For automakers, this actually represents a rather significant challenge. Indeed, over the course of 10 years (between 2021 and 2030), the rate of reduction they will have to meet (approximately -4% per year) will be unprecedented compared to past achievements. And this is despite the fact that three underlying trends are working against this reduction target:

• the transition from the NEDC to the WLTP testing protocol (which more closely reflects real-world driving conditions) in the wake of Dieselgate, which will automatically increase the certified emissions of new vehicles (presumably by around 30%)
• the current shift away from diesel in favor of gasoline (which is likely a longer-term trend) that is driving up CO2 emissions (since, for comparable power outputs, gasoline engines are less efficient than diesel engines)
• … and above all, the growing and undeniable success of heavy, powerful SUVs, which further complicates the equation because they are, by nature, more energy-intensive and therefore produce higher emissions. In fact, these models, which are currently on the rise, clearly run counter to what we need to kickstart the transition in mobility.

Even if automakers were to overcome these obstacles through significant advances in internal combustion engine technology, the only way to meet the targets will be to offer more and more electrified vehicles (either plug-in hybrids or 100% electric). In the shorter term—that is, by 2021—many of these manufacturers (probably about half) will not be able to comply with the regulations by that date (as a reminder: an average of 95 g of CO2 per km), which will result in fines amounting to several billion euros for the industry [2].

Yes, we’re definitely talking about billions of euros, not just a few tens of millions… which is why Fiat-Chrysler and Tesla reached an agreement so that the former could avoid having to foot a hefty bill of 2 billion euros [3]. The flexibility this allows gives one pause. While it does have a theoretical basis (as seen in the European CO2 quota market or, in France, with energy-saving certificates), it’s not easy to determine whether, purely in terms of carbon footprint, sales of large electric cars in countries where electricity is far from being carbon-free can offset Fiat-Chrysler’s gap of a few g of CO2 for these lighter internal-combustion vehicles.

Above all, this announcement reminds us that the key indicator for CO2 monitoring under European automotive regulations is based on exhaust emissions, rather than on a life-cycle basis (which would include upstream energy use—whether from fuel production or electricity generation—as well as the manufacturing and end-of-life stages of vehicles and their components). The choice of a CO2 indicator based solely on tailpipe emissions naturally favors electric vehicles. Thus, in the coming years, we will see the emergence of a wide range of electrified vehicles in Europe.

Let’s hope, however, that it’s more in line with the needs of decarbonization: battery packs with reasonable capacity, coupled with an optimized charging infrastructure, a reduction in SUVs, and reduced traffic through improved fuel efficiency. In any case, the Chinese aren’t waiting for the Europeans in the race toward electrification: apart from Norway, China largely dominates this market. Just imagine that in 2018, as many EVs were sold in Shanghai as in all of France.

What is remarkable is that, at a time when the Chinese auto market is contracting for the first time in 20 years, the EV market continues to grow there, even reaching 7% of sales in December 2018. And to prevent Chinese EV manufacturers from resting on their laurels, Chinese authorities have decided to cut purchase subsidies in half starting in 2019 and are even considering eliminating them entirely in 2020 [4]. This tightening of policy by the Chinese government aims, on the one hand, to stimulate innovation among manufacturers to reduce costs and, on the other hand, to encourage consolidation (so that the “big players” can swallow up the “small ones,” to put it bluntly).

Sources: [1] Challenges [2] Climate Change News [3] Auto News [4] Le Figaro

Stéphane Amant, Senior Manager in charge of the Mobility Division