Car industry keeps its head in the sand over carbon emissions

The car industry is showing little sign of responding to calls for cuts in carbon dioxide emissions from new cars. Fears of increased costs and the dependence of some firms on large, inefficient vehicles lie behind the reluctance to act.

CO2 emissions from road transport in the EU increased by 26% between 1990 and 2004 while emissions as a whole fell by 5%. Passenger vehicles account for two thirds of transport emissions.

In February, the European Commission announced plans for a mandatory target for new car emissions. It proposed a target of 130 grams CO2 per kilometre by 2012, to be achieved through improvements in vehicle technology. A further reduction of 10g/km - taking the target to 120g/km - is to be achieved through measures such as improved air conditioning efficiency requirements and compulsory tyre pressure monitors (ENDS Report 385, p 51 ).

The move came in response to the car industry’s impending failure to achieve a voluntary target of 140g/km by 2008/09. By 2004, EU and Japanese manufacturers had achieved only 161 and 170g/km respectively (ENDS Report 380, p 45 ).

The industry remains opposed to binding targets which it claims are too costly to achieve through improvements in technology alone. It believes they will lead to plant closures and job losses.

A report from ratings company Standard and Poor’s published in March provides grist to the industry’s mill. It warns that the EU sector’s profit margins - at 1-3%, or €500 per vehicle - are "razor thin" because of saturated demand, overcapacity and competition from Asian companies. The cost of achieving the limits, put at €600-3,000 per car, could "seriously undermine" profitability.

Yet the report ignores the likelihood that the industry will pass on the increase to customers. And a mandatory standard - unlike the voluntary agreement - will create a level playing field where all manufacturers will have to share the burden.

There is also considerable uncertainty over the cost of achieving the target, according to a source involved in the Commission’s recent impact assessment. And the situation is not helped by the industry’s tendency to overestimate costs in an attempt to stave off regulation.

The Commission estimates the cost of meeting the 120g/km target at €10-23 billion, or €24-54 per tonne of CO2 abated.1But estimates vary widely depending on the assumptions made. One that pushes up the estimate is that carmakers will try to achieve the reductions while continuing to offer larger, heavier and more powerful vehicles. In fact, carmakers may be forced to reverse this trend.

Simon Barnes, environmental affairs manager with motor industry body SMMT, insisted the cost of the proposed targets is as high as €3,500 per car. It is "simplistic" to argue that it could be passed on to customers, who would not be prepared to pay, he said.

Some manufacturers are far more exposed to the risks than others, according to a recent report from investment analysts Centre Info.2Researchers calculated the sales-weighted average CO2 emissions per car for each of the 12 major manufacturers. They found that cars made by French and Italian manufacturers Renault, Peugeot Citro€n and Fiat had the lowest emissions, at some 153g/km, because of their range of smaller-engined, diesel vehicles.

BMW, and to a lesser extent Volkswagen, had far higher emissions - 191 and 172g/km respectively - because of their range of larger, more powerful vehicles.

Unsurprisingly, the strongest opposition to the Commission’s plans has come from Germany.

But even manufacturers less exposed to tighter controls need to do much more to make efficient cars desirable, according to a survey of car adverts by Friends of the Earth.

The survey found that over half the adverts were for vehicles in the more polluting vehicle excise duty bands E-G - those that emit more than 165g/km CO2. Similar research two years ago found the same result.

Tony Bosworth, FoE senior transport campaigner, said: "The industry should spend less time and money lobbying against targets to cut carbon emissions… and [put] more time and money into building and promoting greener cars."