Geneva Motor Show 2008: OICA Calls For Integrated Approach to Climate Change and Road Transport

OICA Secretary General Calls for Integrated Approach

Secretary-General of The International Organisation of Motor Vehicle Manufacturers (Organisation Internationale des Constructeurs d'Automobiles or OICA) Yves van der Straaten, called for an integrated approach to road transport and climate change in a speech given at the Geneva Motor Show, echoing similar sentiments from the European association ACEA. "Vehicle manufacturers are world leaders in research and development and spend many billions of euros every year on R&D to further improve existing concepts and to develop hybrids or alternative fuel vehicles using natural gas, biofuels, hydrogen and others", he said.

"Government Policies Need to be Clear, Internationally Coherent, Predictable and Stable"

When it comes to road transport, every actor has a role to play, from vehicle manufacturer to car owner and driver, van der Straaten said: "Vehicle technology alone however cannot give the complete answer," he added. "A pragmatic approach is needed, including also fuels and their availability, improved road infrastructure and traffic management and of course the consumer who buys and uses the product. To support this, government policies need to be clear, internationally coherent, predictable and stable."

Van der Straaten emphasised the fact that vehicle manufacturers have already made substantial efforts to reduce CO2 emissions and that this is ongoing, pointing to the fact that the average fuel consumption of cars sold in Europe has decreased by more than 12% in ten years. At the same time, vehicle weight has increased by more than 16% due, among other things, to increased vehicle safety and other legal requirements which have put counter-productive pressure on the efforts to reduce CO2.

Van der Straaten also pointed to other environmental improvements such as pollutant emission limits, which often contradict fuel economy measures. Modern powertrain technology emits only a tiny fraction of the exhaust pollutants of 15 years ago and, with the replacement of older vehicles, air quality in many cities is improving. However, the reduction of pollutants can sometimes mean an increase in fuel consumption and therefore CO2 emissions. For instance, lowering the combustion temperature to reduce nitrogen oxide leads to higher fuel consumption.

Outlook and Implications

The industry has called for longer timelines to implement technologies. ACEA again called on the EU to give the industry enough lead time to meet strict new CO2 emission limits, asking that the upcoming legislation be shaped realistically and constructively around the industry's manufacturing cycles. "The industry will be short of lead-time ahead of the new legislation and the European Commission has, therefore, principally introduced a phase-in period between 2012 and 2015. This is an important element in the CO2 proposal which needs to be further developed," commented Christian Streiff, ACEA President and CEO of PSA Peugeot-Citroën last month (see Europe: 28 January 2008: European Emission Limits are a Balancing Act for Christian Streiff—Interview).

ACEA also noted that the European Parliament has already voted twice in favour of 2015 as the most appropriate date for new legislation to enter fully into force. Planning certainty and sufficient lead-times are of crucial importance to the automotive industry because of the sector's long development phases, the extensive investments involved and the corresponding lengthy production cycles required to recover investments. No less than 60% of all cars that will be on the market in 2012 are already in production or in the advanced development stage today.

In addition a preliminary report prepared by the European Parliament's legal affairs committee into the EC's proposed CO2 caps has found that the proposals exceed the Commission's remit. A quote from a leaked version of the Parliament's report claims that the process of fining carmakers looks like "a tax for the benefit of the community" and went on to state that the community has no "competence whatsoever to levy [such a tax]". The Parliament's legal service has now been asked to prepare an additional report looking into the issue.

Late last year European industry association, ACEA, which of course represents the interests of the auto industry, complained that there was 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 proposed penalties price a tonne of carbon produced by cars at up to 475 euro, whereas the ETS market price will evolve towards about 33 euro per tonne, according to EC estimates, from today's price of less than 5 euro. This price of 475 euro is based on the assumption that a car drives 200,000 km over its lifetime, and one gram of CO2 emitted above target corresponds to 200 kg of excess emissions, or 0.2 tonne of CO2. So if the car industry were to be fined 95 euro per gram above target, this would equal a payment of 475 euro (5 X 95) for each tonne of CO2, which is far higher than in any other sector, ACEA points out. The trade association also notes that penalties for the car industry would be significantly higher than any cartel fine paid in EU competition cases, where such fines concern illegal competition law infringements with huge damages for consumers. Compensation payments in the United States and Japan are much lower, it adds: U.S. corporate average fuel economy (CAFE) fines stand at about 10-15 euro per gram of excess CO2 and in Japan at about 6,000 euro per manufacturer.

Elsewhere, German Chancellor Angela Merkel has held successful initial talks with the French President Nicolas Sarkozy over reaching an agreement on a response to the EU's plans. Speaking on the margins of the CeBIT IT trade fair, Merkel said, "A deal is envisaged with France on the European targets to reduce carbon dioxide from cars". It is also likely that the two countries will set up a joint working group on how theywill attempt to meet the challenge of the EU's proposed CO2 limits for passenger cars.

Germany and France have previously disagreed over how to tackle the EC's proposals to place stringent restrictions on the CO2 emissions of passenger cars. At the heart of the disagreement was how to structure the regulatory framework and penalties for Europe's car manufacturers. Merkel's government is keen to defend the interests of the German automotive industry, which tends to build a bigger proportion of powerful, higher polluting vehicles, while the French and Italian industries produce a higher proportion of smaller, less polluting cars. In a recent interview with Global Insight, Streiff said that they had repeatedly asked for more time to allow for a sufficient development cycle to properly tackle CO2 emissions. He said, "This is really a consensus amongst all car-makers—we are dedicated to reducing CO2 emissions, we're doing our jobs, but please give us the technical time to do it. With the lead and development times in the car industry, everyone knows this can't all be done in just a few years"

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