How Clean are Europe's Cars (2011 edition)

This report is the sixth T&E has published on the annual progress Europe’s major car manufacturers have made in reducing CO2 emissions and fuel consumption of new cars. 

As in previous years, we assess how each carmaker is positioned to hit the mandatory CO2 standards that the European Union has set for 2015. And we assess progress per EU Member State.

In this year’s report, we included two additional pieces of analysis: 
• An analysis of estimates made in the past of what it would cost to arrive at today’s CO2 emission levels.
• An analysis of what the impact would be if Europe stopped making CO2 standards for manufacturers dependent on the weight of the cars they produce, and instead move to size-based standards;

Main conclusions

Progress of Europe’s largest 15 carmakers in cutting CO2

• The industry as a whole reduced average CO2 emissions by 3.7% last year continuing the trend of much faster reductions since adoption of the EU’s mandatory CO2 targets for cars. The industry reached an average CO2 emission of 140 g/km;
• Progress was more evenly spread across carmakers than before; Europe‘s eight largest carmakers by sales all reduced CO2 within 2% of the average i.e. between 2 and 6%. Volvo was an outlier with a 9% reduction; Mazda and Honda were both negative outliers, with small increases in emissions;
• The top four in terms of fleet-average CO2 emissions remains unchanged. Fiat leads with 126 g/km, followed by Toyota, PSA and Renault. Daimler remains last on the list, having reduced CO2 in 2010 by a below-average 3%;
• The industry as a whole is only 7% away from hitting its 130 g/km target for 2015, last year it still had a 11% gap to close
• Toyota is again closest to hitting regulatory CO2 targets; the company is virtually there, five years ahead of time. PSA and Fiat are very close too with 3 and 5% cuts left to make respectively. Daimler is still furthest away with a 15% gap yet to close
• The distance-to-target figures do not allow for loopholes such as ‘eco-innovations’, ‘supercredits’ and provisions for carmakers below 300,000 sales. Carmakers are therefore even closer to meeting targets than these figures suggest.

The headline conclusion of last year’s report therefore remains unchanged: all available evidence points towards carmakers in Europe heading for very significant ‘over-compliance’ with the CO2 regulation and are hence likely to hit the 130 g/km CO2 target for 2015 several years in advance.

On compliance costs

Studies conducted ten and five years ago predicted that reducing CO2 emissions from new cars to an average level of 140g CO2/km would make cars €2,400 and €1,200 more expensive, from 1995 and 2002 baselines respectively.

This implies that these studies estimated the marginal costs of one percent of CO2 emissions reductions towards 140 g/km at around or likely above €100, which is about 0.5% of a car’s retail price.

Meanwhile new cars have become 13% cheaper on average in real terms over the past eight years, which means a €20,000 car in 2003 would sell for €17,400 now. Probably coincidentally, car prices have fallen more quickly since CO2 reductions began in earnest, from an average of 0.7% per year over the 2002-2006 period to 2.4% per year on average over the 2007-2010 period.

We are aware of the complex set of factors that make up a car’s retail price, and that regulatory compliance costs is just one of these factors. Nevertheless the analysis shows that fears that reduction of CO2 emissions would make cars unaffordable have been unfounded.

In addition, the absence of any relationship between reduction of CO2 and higher retail prices – if anything an inverse relationship was found – and the significance of the estimated cost figures (every % of CO2 reduction would cost about 0.5% of a car’s retail price) strongly suggest that the costs of reducing CO2 to an average of 140g CO2/km were considerably overestimated.


On the consequences of a move towards ‘footprint’-based CO2 standards

T&E has long argued that weight-based CO2 standards make reduction targets harder to achieve because they discourage lightweighting. T&E has long advocated ‘footprint’ (the area between the four wheels) -based standards instead.

A change to footprint-based CO2 standards would hardly change the relative positions of carmakers towards their regulatory targets. For most, in particular the volume carmakers like Volkswagen Group, PSA, GM, Toyota and Hyundai, the change would be in the 0-1% range.

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