EU’s regulation of car decarbonisation: 25 years on bumpy roads by Mulugeta Getu Sisay

The threat of increased emissions of greenhouse gas (GHG) and its imminent threat to humankind have forced the EU and other global actors to adopt new regulatory measures. However, transport has continued to be a difficult and complex sector to decarbonise. A study commissioned by EEA found that in 2017 the transport sector accounted for 27% of the EU’s (EU-28) total GHG emissions. A further breakdown of the transport emissions revealed that the road transport takes about 73% of it (passenger cars alone accounting for 44% of the emissions) while aviation and maritime each accounted for nearly 13%. Moreover, over the years GHG emissions from the EU’s transport sector has increased both in absolute terms and share of total emissions although emissions from other sectors have decreased. For instance, the 2017 transport emissions were 28% above 1990 levels whereas the EU’s total GHG emissions were 22% lower than the 1990 level. Hence, the EU is likely to miss out the target of reducing transport emission to only 8% above the 1990 level by 2030 and 60% below the 1990 level by 2050.

Over the past three decades, beginning from the publication of IPCC’s first assessment report in 1990, the EU has conducted many rounds of discussions and adopted a series of regulatory instruments to reduce emissions from cars. The early negotiation brought the commissions strategy and future regulation scenarios in 1995 COM(95) 689. The strategy set to achieve 120g CO2/km by 2005, the latest by 2010 through ‘three pillar strategies’ – intensity reduction through voluntary commitments by automakers, fiscal measures and information instruments (labelling). The commission’s strategy of implementing a uniform regulation and robust monitoring scheme at the EU level for all the three overarching strategies have faced various challenges and brought limited progress over the years.

The EU wide fiscal measures which were planned to stimulate uptake of low emitting cars were blocked by some Members claiming it to be ultra vires of EU’s mandate. As a result, it was left for Members to determine the design and implementation of fiscal measures. Moreover, although an EU wide car labelling scheme has been in place since 1999, researchers found that its utility and impact were negligible as it lacked uniformity in design and content. The other strategy of regulating the intensity of car’s emission by regulating automakers, albeit with various instruments, have also gone through bumpy roads. In the following note, I discuss how this latter pillar of regulating the supply side has evolved over the past 25 years, divided opinions and remained contentious. To that end, I show the three phases it has assumed over the years – voluntary agreement, binding standard and phasing-out of conventional cars.

Voluntary agreement (VA)

EC struck a deal in 1998/99 with major automakers associations including the European Automobile Manufacturers’ Association (ACEA). Accordingly, auto industries agreed to limit carbon emissions to 140g CO2/km in 2008 and possibly to reduce it to 130g CO2/km by 2012. Accordingly to industrial commentators, by signing the non-binding VA, the auto industries have effectively pre-empted, or at least delayed, the introduction of a more stringent and mandatory emissions regulation.

Looking back the effects of the VA on EU’s car emission, three effects were apparent – increase in the fleet composition of diesel cars (dieselification), increase in the average size of cars, and more importantly missing out the agreed targets. EU’s review found that despite initial signs of progress early on, the industries were falling behind the 2008 and 2012 targets. Even then scholars asserted that the CO2 emission reduction in the early years of the VA was attributed to the shift to less emitting diesel passenger cars than a decrease of individual car’s fuel consumption. Likewise, during the period, the EU’s car-size increased on the average by 100kg every five years.

The results were upsetting when seen both from the long-term CO2 emission goals and other health-related impacts of diesel fleets. Some argued that the periods spent on VA were a ‘lost opportunity’ where a more stringent regulation could have achieved more and shaped the market for future interventions. Given the average age of a car on the road and evolution of technology, cars manufacture and industrial designs created during the VA will remain in the market for sizable years, and hence a setback for any future gains. Perhaps, the failure of VA scheme along with the recent Volkswagen’s emissions scandal (dubbed as dieselgate) is instrumental in shaping the future environmental regulation in favour of direct regulation than co-regulation. On the other hand, vital lessons were learned about the industrial actors, the complexity of the auto sector and limitations of EU’s governance system that could be used as foundations for future policy designs in the sector.

Binding emission standards

EU’s review of the scheme concluded that industrial would fail to meet their targets, and binding limits and additional measures should replace the ill-functioning VA. That marked the return of a direct regulatory instrument in the form of a binding standard enforced against auto manufacturers. After a protracted negotiation amongst Member states and industrial lobbyists, the EU adopted its much-compromised standards, Regulation (EC) 433/2009, in 2009. The regulation required average carbon emissions of 130 gCO2/km for newly registered passenger cars by 2015. However, the target of 130g CO2/km was met around 2013 earlier without much disruption on the industry contrary to the warning from the auto manufacturers. That has prompted the second regulatory target of 95 gCO2/km for cars by 2020.

For environmentalists, the final text missed EU’s previous commitment as sealed in 1995. EU’s target of achieving a mean emission of 120g CO2/km for newly registered cars has been pushed from 2005 to 2010 by the VA, to 2012 during the start of the negotiation and finally to 2015 in the final text of the regulation. The flexible schemes, especially the exemptions, preferences and pooling schemes, were also the subjects of debates. Typically, critics argued that the regulation provides no meaningful incentive for the luxurious, expensive and highly polluting car manufacturers to commit to emission reduction, and instead facilitated market distortion, and above all granted the license for the better-off groups to act irresponsibly. However, for others, the regulation should be celebrated as a milestone and breakthrough in regulating one of the most difficult and high carbon-emitting sectors.

The EU’s incremental approach continued to evolve with new post-2020 emission targets set for both cars and vans in 2019. Accordingly, Regulation 2019/631 required the mid-term target of reducing emission by 15% from the 2021 emission target for both passenger cars and vans by 2025. Besides, a 37.5% and 31% reduction for passenger cars and vans, respectively, from their 2021 emission target by 2030. Apart from such contentious targets, the regulation provided new incentive mechanisms such as the super credit system for zero- and low-emission vehicles (ZLEV), defined as cars or vans with an emissions level of zero up to 50 gCO2/km. Environmentalists criticised the lenient system created under the new regulation claiming that it leaned to industrial lobbyists.

Phase-out of conventional cars

Recently, due to the financial incentives and infrastructure expansions provided by Member states, auto manufacturers are announcing more low carbon-emitting cars such as electric vehicles (EV) models whose market share is expanding. Although it has not set a clear transition period, regulation 2019/631 signalled that low emission vehicles are the future of the roads. A proposal was presented to EU by Denmark to adopt an EU wise phase-out scheme for conventional (diesel and petrol engine) cars as early as 2030 but was difficult to reach on a consensus under the EU system

Expectedly, members were divided along the lines of local contexts (strength of their auto industry and car market). Categorically, car-producing countries along with used-car importing central and eastern European countries opposed the accelerated phase-out of conventional cars and opted for an incremental approach. Hence, some countries like the UK, France, Norway, the Netherlands, Sweden, Ireland and others have announced unilateral plans to ban registration of new conventional cars between 2025 and 2040. Certainly, this will trigger an interesting legal battle on whether individual Member states can ban conventional cars.

Conclusion

Opinions are divided on whether the EU regulations have been stringent enough to achieve the long term targets and whether banning of conventional cars any time before 2040 is feasible. One group argues that existing targets are less stringent and created many loopholes for it to be manipulated. Furthermore, the incremental approach has not brought enough changes to some types of cars and purchasers. For instance, gas-guzzler and carbon-intensive sport-utility vehicles (SUV) have continued to attract more buyers and accrue lucrative profits for automakers. Hence, to the frustration of many, reports revealed that average emissions from cars in the EU have increased in 2017 and nobody is on track to achieve the 2020/21 target of 95 gCO2/km. To others, EU’s regulation has successfully pushed average emissions from new cars to fall below 120 g CO2/km and manufacturers to innovate low emissions cars such as electric vehicles (EV) and hydrogen cells. Furthermore, it is understood that the EU’s regulation has successfully inspired the adoption of carbon emission and fuel economy standards in other jurisdiction, notably in Asian countries.

Finally, we are uncertain what the future – past the COVID-19 pandemic – holds for the system and how the industry will respond to it. However, as economic stimulation and public health will attract much attention than climate discussion as witnessed in postponing the much-anticipated UNFCCC annual climate summit COP26 for 2020, it might result in missing commitments and lax regulatory oversight, and hence slow the incremental reductions achieved in the past 25 years. Contrary, if the pandemic is bad enough to plunge countries into the much-feared global economic recession or at least economic stagnation, total emissions will slow down as witnessed in the 2008 economic recession. Yet this latter scenario is likely to have a short-lived impact than bringing a long-term behavioural change or emissions reduction trajectory to the benefit of the environment.

Sans titre

Mulugeta Getu Sisay is a PhD researcher at Cardiff University School of Law. His research looks into legal instruments for regulating emissions from road vehicles in Ethiopia. He is also investigating if the EU, the UK and the US car emission regulations offer lessons for developing countries. He obtained his Law degree from Haramaya University and LL.M. from Alabama University in Comparative environmental law. Mulugeta served as a lecturer at Haramaya University College of Law for several years where he taught environmental and natural resource laws courses and was editor of Haramaya Law Review in Ethiopia.

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