• China has realised something that Mr Barroso could learn from

    Editorial by Karsten Krause China, China, China. It seems to be the golden rule that, within 10 minutes of any discussion about legislating on automotive standards, at least one reference to the situation in China is necessary. Whatever the topic, or whatever point is being made, a juicy story from the Far East helps. And the message is: automotive legislation in Europe makes no difference because of the situation in China.

    There are various factors relevant to the issue of the growth of cars in China, like air pollution, competition for global resources, congestion, and the importance of car production in the economic system. But perhaps the biggest difference to the situation in the EU is the clear political will of the Chinese government to face up to the problems. While the current EU leadership seems limited to the invention of new discussion groups (Cars21), the postponement of legislation (Euro-5), and policy concepts that have proven their lack of effectiveness (the voluntary CO2 agreement), China is implementing groundbreaking legislation on energy efficiency for new cars.

    Phase I of the new fuel-consumption standards will begin in 2005, and Phase II in 2008. While China has adopted “Euro” standards for regulating “conventional” emissions from passenger cars in the past, the new legislation on energy efficiency breaks with this pattern.

    China’s system has 16 weight classes and links the weight of each individual model to a maximum limit for fuel consumption. Unlike the current EU approach, no averaging is allowed. Already Phase I is slightly more stringent than the similar Cafe system in America. Phase II goes even a step further, it undercuts the average fuel economy of the US vehicle fleet by about 10%.

    According to the World Resources Institute, in 2003 66% of cars sold in China met the Phase I standards and 35% the Phase II standard. The system will hit mostly SUVs and minivans – only 4% already meet the Phase I standards and none if today’s light trucks meet the Phase II standard. The focus of the system is on fuel efficiency of the mass market. Rather than completely closing the door for luxury car imports the Chinese government is considering using higher taxation for imported cars with higher fuel consumption. From the Chinese government’s point of view, these vehicles would not have significant impacts on China’s fuel consumption due to their low volume. But the new standards should also prevent the SUV growth that has happened in the USA and Europe.

    The system will affect two types of vehicles: firstly, the gas guzzlers imported to China from GM, DaimlerChrysler and other global players. Secondly, inefficient Chinese producers will be either driven out of the market or forced to improve their products. The legislation is therefore not only linked to environmental and energy-saving objectives but should also boost the competitiveness of the automotive sectors and the transfer of better technologies from foreign partners.

    The Chinese fuel economy standards could be criticised for being not stringent enough or for not creating an incentive for improving cars that comply with the maximum standards for their class. But they give two strong signals to the global car makers: China will not be the place where old, second-class technologies can be dumped. And China is no longer accepting European standards.

    The Chinese economists know that those who set a standard have an advantage and benefit most. The economy is dynamically changing, Senhor Barroso.

    This news story is taken from the July 2005 edition of T&E Bulletin.