Wrong direction

Al Bedwell, Director, Global Powertrain

29 March 2018

As a central plank of EU policy to reduce greenhouse gas emissions from the region’s road transport sector, average new car CO2 emissions targets have been a huge driver of technical change as well as vehicle tax regimes for many years. Since the targets became a legal requirement (rather than a gentleman’s agreement) in 2007, the average figure has fallen from 158 gm/Km (2007) to 118 gm/Km (2016) and many millions of tons of CO2 have been prevented from entering the atmosphere. Debate can be had about the absolute toughness of the targets, but there is little doubt that without this scheme, vehicle efficiency gains would have stalled as they did during the pre-enforcement period. Since the carrot became a stick in 2007, CO2emissions have typically fallen by 3-4% year-on-year.

Worryingly, this figure fell to 1% in 2016, and preliminary results for 2017 suggest that more bad news is to come. Figures collated by national bodies for France, Germany and the UK indicate that 2017 new passenger car average CO2 emissions in those markets were higher than in 2016.

“In theory, the problem is entirely owned by the industry”

Actual CO2 emitted isn’t measured – that involves a calculation containing use patterns and is better arrived at by examination of the total quantity of fuel burned. But the point is that, on average, the type of vehicle being sold in those three markets is becoming less fuel efficient over time. Assuming that driver behaviour isn’t changing much, we can deduce that more CO2 is being emitted. Given that the three markets mentioned make up a large part of the EU car market and are not atypical, we can also deduce (or at least make a safe bet) that when the region-wide CO2 figure is released later this year, it won’t make good reading for regulators or for the car industry.

In theory, the problem is entirely owned by the industry. It has allowed the vehicles it sells, on average, to become less fuel efficient. Therefore targets may be missed and fines may have to be paid. When we look at the likely causes of the problem though, it’s not so simple. Competitive pressures force carmakers to follow trends. Unfortunately in this case the trend has been toward SUVs rather than smaller lighter, more fuel-efficient cars. If it’s a choice between joining the SUV party and losing market share, there is little competition.

The other key trend that’s fed into the current situation is the decline in the share of fuel efficient diesel cars. In this case the industry, or at least one major player, can take more responsibility. However it should be remembered that diesel share peaked in Europe in 2011, well before the VW diesel gate episode.

The real loser is the environment. We’re expecting this subject to create some tricky questions for the sector, especially when the regional figure gets released. As events unfold, we’ll be commenting on the likely impact on technologies and regulation.