Competing options for EC curbs on CO2 emissions from cars

Proposals for reducing carbon dioxide emissions from cars have been tabled for discussion at EC level by France, Italy and ACEA, the European car manufacturers' federation. They will now compete with ideas put forward last year by the UK and Germany, suggesting that there is little prospect of the Community meeting its deadline of legislating on the issue by the end of 1992.

The options for curbing CO2 emissions for cars are being examined by the Motor Vehicle Emissions Group (MVEG), a body of industry experts and national officials which advises the European Commission.

Arresting and then reversing the rising trend of CO2 emissions from road transport will be essential if the Community is to meet its target of stabilising its CO2 emissions at 1990 levels by 2000. Last year, a Directive on vehicle emissions required Environment Ministers to adopt new controls on CO2 emissions from cars by the end of 1992. But no legislative proposals have yet been made by the Commission, and the growing number of ideas being discussed within MVEG make this deadline highly unrealistic.

The UK and Germany led the way in 1991. The UK's proposal was based on a system of tradable emission credits. Manufacturers whose cars met a specified fuel efficiency standard would sell their credits to those whose products did not. As the standard was tightened, so the credits would become more expensive, providing a progressively increasing incentive for improved fuel efficiency.

The Germans, on the other hand, favour a system in which CO2 emission targets would be based on some car parameter, such as engine capacity or vehicle weight. The UK's concern is that this could encourage manufacturers to produce larger cars which would have a less demanding emission target to meet.

France has now chipped in with a proposal for an approach making use of both financial and regulatory instruments. Under its scheme, all cars on the Community market would have to meet an absolute emission limit expressed in terms of grams of CO2 per vehicle kilometre. In addition, each manufacturer or importer would have to comply with an average CO2 emission standard. Companies exceeding this average would pay a fine, while those beating it could be offered some financial benefit. These proposals share some of the features of the UK's ideas on tradable credits.

A fourth option has been tabled by Italy. It would involve a variable car purchase tax based directly on CO2 emissions. Below a threshold set initially at 100 grams of CO2 per kilometre in 1994, no tax would be payable on a new car. Above a ceiling set initially at 400g/km no extra tax would be payable. Between these two values the tax rate would rise in steps exponentially. This proposal happens to favour Italy's small car producers.

Meanwhile, ACEA has been struggling to reconcile the often divergent interests of its member companies and agree a common position on the issue. European manufacturers have already committed themselves to reduce CO2 emissions from the new car fleet by 10% between 1993 and 2005. However, this is way below the regulators' expectations. Last year, the UK's Transport Secretary, Malcolm Rifkind, urged manufacturers to pursue a 40-50% improvement in fuel efficiency by 2005 (ENDS Report 202, p 5).

In February, ACEA proposed that "if legislative requirements are deemed necessary to control CO2 emissions, then these requirements should be defined as a zero-based CO2 emission tax fully harmonised in the EC Member States."

In April, ACEA expanded on its position by proposing that any new tax should not be an additional levy but should replace existing taxes, and be related directly to CO2 emissions.

ACEA also argued, however, that any such tax should not be penal in its effects on any segment of the market. This appears impossible to reconcile with the need for a tax penalty on high CO2 emitters if consumers are to have an adequate incentive to buy low-emission vehicles.

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