The new European regulation that imposes limits on GHG emissions for heavy-duty vehicle manufacturers

This article was originally published in our "Décryptage Mobilité" newsletter. To receive future articles by email as soon as they are published, Subscribe now. By Rodrigo Baranna, Consultant

In April, the European Parliament approved a new regulation on greenhouse gas (GHG) emissions from the transportation sector. This is the The first regulation imposing CO2 emission limits on new heavy-duty vehicles sold in the European Union. This is a real first, as until now heavy-duty vehicles were subject only to restrictions on local pollutant emissions through the Euro standards (Euro 0 through VI), which cover pollutants such as nitrogen oxides (NOx), carbon monoxide (CO), and fine particulate matter. Similar to the European CAFE (Corporate Average Fuel Economy) regulations applicable to new passenger cars and light-duty vehicles, the new regulation imposes GHG emission reduction targets on heavy-duty vehicle manufacturers.

The text approved by Parliament calls for a 15% reduction in the carbon intensity (in g CO2e/t-km) of new vehicles by 2025 and a 30% reduction by 2030.^[1]. This latter target will be reassessed during a review scheduled for 2022. According to the NGO Transport & Environment, the significance of this decision lies primarily in its pioneering nature within the heavy-duty vehicle sector rather than in its target, which is said to be far from compatible with the Paris Agreement ^[2]. However, In the French context, the goal of a 30% reduction by 2030 is well aligned with the latest National Low-Carbon Strategy (SNBC). In fact, the SNBC also aims to reduce the average carbon intensity of new heavy-duty vehicles by about 30% by 2030. However, the SNBC’s base year is not 2019, as it is for the European regulation, but 2015. Assuming a linear trajectory between 2015 and 2030, the reduction between 2019 and 2030 would be just over 20% according to the SNBC. The text adopted by the European Parliament is thus more ambitious than France's target. Initially, only the following segments The following vehicles will be subject to the new regulations: cargo trucks and tractor-trailers, with a 4x2 or 6x2 axle configuration and a gross vehicle weight rating of more than 16 metric tons. The 2022 revision is expected to expand the scope to include other categories of heavy-duty vehicles, such as buses, tour buses, recreational vehicles, and smaller trucks. The exception will apply to commercial vehicles (e.g., construction, household waste collection, etc.), which will remain exempt from the established limits. Similar to the CAFE regulations, the limits apply to the average emissions of all new vehicles sold by a manufacturer in a given year.

Another similarity between the two regulations is the promotion of zero- and low-emission vehicles by implementing bonuses proportional to their share of sales. In the case of light commercial vehicles (LCVs), zero- and low-emission vehicles are defined by their emission levels: less than 1 g CO2e/km for the former and less than 50% of the segment average over the reference period for the latter. However, The two regulations differ on certain methodological points. Instead of adjusting the target value in proportion to the vehicle's mass, as is done under CAFE, the regulation for heavy-duty vehicles is based on a segmentation-based categorization. Unlike the CAFE regulations, the reduction targets under the new regulation also increase linearly between the various defined milestones. In addition, the PLs will be subject to accounting rules that differ from those for passenger vehicles. The new regulations provide for a system of intra-manufacturer emission credits and debits that can be carried over from one year to the next, subject to a limit of 5% of the manufacturer’s target for emission debits. However, the exchange of these credits between manufacturers is not permitted, thereby preventing the creation of a sector-specific credit market. It is important to note that emission credits and debits do not apply to the final year (2030), when each manufacturer must have achieved the 30% reduction target.

Starting in 2025, exceeding emission limits—after taking into account credits and authorized debt—will result in a fine of 4,250€ per gCO2e per metric ton-kilometer of excess emissions., this amount multiplied by the total number of new vehicles sold by the manufacturer during the year in question. The fine scale will increase for reach €6,800 per gCO2e/t-km by 2030. For example, in 2017, more than 50,000 new heavy-duty trucks were registered in France ^[3]. Assuming an average excess of 1 gCO2e/t·km, manufacturers operating in France would have had to pay more than 210 million euros. The regulation must still be approved by the Council of Ministers of the Member States and published in the Official Journal of the European Union before it can enter into force.

Sources: ^[1]European Parliament^[2]Transportation & Environment^[3]National Road Committee