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European Parliament Votes in Favour of Industry-Backed "Integrated" Approach to Fuel Economy

17 Jan 08

The European Parliament voted in favour of the industry-backed CARS21 integrated approach to impending CO2-curbing legislation and calls for strengthening automotive industry competitiveness.

Global Insight Perspective
Significance	The vote and statements in favour of the industry-backed CARS21 report is a positive step for the industry. Although there is still a long way to go, the industry's message that much of what is being demanded by the draft legislation is simply unworkable in the timeframe appears to be getting through.
Implications	The EU Parliamentary statement also highlighted the need for member states to harmonise taxation regimes, currently a major hurdle for the automakers in benchmarking and implementing new emission reducing technologies.
Outlook	The Commission's own proposals, which were viewed as too severe by the industry, have also failed to garner the support of the parliamentary members, whose measured statements, encompassing many of the external factors affecting vehicle development, signal the hope that the EU will adopt a more measured and realistic approach to the CO2 reduction targets.

Commission Proposals Fail to Gain Parliamentary Support

The European Parliament voted in favour of the "Competitive Automotive Regulatory System for the 21st century" (CARS21), the industry-backed proposals supported by the European carmakers' association ACEA. The vote came during the Parliament's plenary session yesterday in Strasbourg and is an important step for the auto industry. "The Parliament has clearly recognised the crucial role which 'better regulation' principles have to play in the EU decision making process to ensure that sufficient lead-time is provided to implement new requirements and legislation is preceded by a transparent, thorough assessment of the impact on EU competitiveness and employment levels," said Ivan Hodac, Secretary General of the European Automobile Manufacturers' Association (ACEA).

The parliament also stated the need to improve the regulatory framework, and also underlined the need to improve road safety and reduce CO2 emissions from cars through an integrated approach, involving all relevant parties in a coherent policy framework.

The industry-backed approach stresses that mandatory targets for CO2 emission reductions cannot come into force before 2015, giving the automakers three valuable years over the Commission's own proposals which stipulate 2012 as the deadline. In addition, the Parliament called for "realistic" targets. The report states that limit values should be set according to the weight of the vehicle.

The Parliament's statement also urges European Union (EU) member states to reach an agreement on the Commission's proposal to harmonise car taxation in relation to CO2 emissions. "Harmonisation of car taxation is extremely important, in order to avoid further internal market fragmentation stemming from the very different schemes currently applied and introduced by the member states," said Hodac.

The Parliament also called for significant increase in research & development (R&D) funding for the automotive sector before 2012 and urges the member states to increase their investment in automotive-related R&D, especially in relation to the national CO2 emission reduction targets. The report concludes by pointing to the importance of the car industry for employment, growth, innovation and competitiveness. "Our industry plays a vital role in society. CARS21 shows the way to improving the EU regulatory framework, facilitating important societal needs such as growth, environment and road safety. We will continue to give input to this important process," said Hodac.

Outlook and Implications

The vote was an important step for the industry-backed CARS21 approach, which moves the timescale for meeting the impending regulations back to 2015, seen by many within the industry as essential for the realistic implementation of the requisite technologies. The statement also brought the issue of vehicle weight and safety to the fore and proposed that considerations be made for vehicles meeting safety standards. The parliament suggested that the Commission develop a system that allows cars to emit additional CO2 if these are a result of legally binding safety measures.

However the parliamentary statement also said that CO2 reductions should be addressed through improvements in vehicle technology alone. In December the European Commission (EC) unveiled its own proposals that insisted on the 2012 timeframe although the proposals also left the door open to complementary measures, which have yet to be detailed (see Europe: 20 December 2007: New European Commission CO2 Emission Limits Cause Uproar within Auto Industry), but could include biofuels, tyres and eco-driving measures. The EC's proposals also entailed the controversial system of fining, not mentioned in this parliamentary statement.

The scale of the fines was roundly condemned by the industry as it bears no relation to any other industry fines regarding CO2, nor any relation to the current cost of carbon offsetting and exchange costs. ACEA gave voice to its complaint in December, saying that there is no link between the penalties being proposed for the car industry and the price of carbon applied to other industries through the European emissions trading scheme (ETS).

The vote will no doubt further extend the debate, but also highlights the key role that individual member state taxation plays in benchmarking for the industry.

For their part, Green MEPs were outraged by the watering down of environmental targets for the automobile industry, saying the "approach flies in the face of the EP's attempts to position itself as a leader in tackling climate change". However, for many industry observers, this measured statement, which accounts for the multiple and various external and internal factors that affect vehicle development, was welcomed.

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