Sizing Up the Commission’s Clean Mobility Package

11.09.17 | Blog | By:

Yesterday the European Commission released its long-awaited Clean Mobility package of proposals, which include new CO2 reduction targets from vehicles. The shocker: no zero emission vehicle (ZEV) mandate. While Commission representatives have denied in the media that such mandates were ever under consideration, we very well know that’s not true. Recall this comment from European Commission Energy and Climate Commissioner Miguel Arias Cañete I highlighted in a recent post:

“One option we are looking at is a mandate to require a minimum share of a manufacturer’s fleet to be zero- and/or low-emission vehicles. The other option would be to opt for a crediting system to allow for a more flexible approach which would provide a continuous incentive for innovation. Personally, I do not like mandate or quotas.”

It looks like the crediting system won out, much to the disappointment of NGOs, which had pushed for quotas and tougher targets.  The rumor is that a ZEV quota and a penalty for not meeting the quota was killed internally before it was released this week. The NGO Transport & Environment (T&E)  has said this could end up resulting in more car bans, among other possible measures.  While T&E calls the proposal a “gift” to the industry, ACEA has said the new targets are “overly challenging.” The industry had considered a 20% reduction by 2030 for cars “to be achievable at a high, but acceptable, cost.”

Instead of a ZEV mandate or quota, the Commission will require a 30% CO2 reduction in new cars and vans by 2030 compared to 2021 levels with a 15% interim target to be met by 2025. Manufacturers achieving a share of zero- and low-emission vehicles, which is higher than the proposed benchmark level of 15% in 2025 and 30% in 2030, will be rewarded in the form of a less strict CO2 target. For determining that share, account is taken of the emission performance of the vehicles concerned. As a consequence, a zero-emission vehicle is counted more than a low-emission vehicle.

This seems somewhat similar to China’s New Energy Vehicle (NEV) policy. Under the policy, the government will calculate a NEV score by summing up the products of annual manufacturing or import volume of each NEV type and the per-vehicle NEV score. Different scores are assigned to each type of NEV based on electric range. A company generates NEV credits if its actual score is higher than its target NEV score. It will face a deficit if its actual score falls short of its target. Auto companies are also allowed to apply NEVs towards compliance with existing fuel economy standards with zero upstream CO2 along with multipliers starting with 3x in 2019 and 2x in 2020.

The Commission notes with respect to the proposal that:

“The proposed framework aims to support a gradual transition from vehicles powered by conventional engines to electric vehicles in order to allow for sufficient time for re-training and up-skilling of those employed in the automotive sector, so that no worker or region is left behind.”

And therein lies the key issue with a ton of leverage: competitiveness and jobs. The Commission says:

“The EU must seize this opportunity and become a global leader, with countries such as the United States and China moving ahead very quickly. To give one example: EU sales of new passenger cars relative to global sales have decreased from 34% before the financial crisis (2008/2009) to 20% today. To maintain market shares and to accelerate the transition towards low and zero emission vehicles, the Commission proposed today new targets for the EU fleet wide average CO2 emissions of new passenger cars and vans that will apply from 2025 and 2030 respectively.”

The Commission has also stressed that the proposal improves air quality and reduces CO2 in a technologically neutral way. “Almost all cars in the current stock are powered by an internal combustion engine. Even with a rapid increase in zero- and low-emission vehicles it is clear that conventionally fuelled vehicles will still make up an important part of the EU vehicle fleet in 2030.” The Commission estimates that by 2030, 80% of the fleet will still be made up of internal combustion engines (ICEs).

Other key provisions include the following:

  • NEDC and WLTP: According to the Commission, to provide for the transition from the current to the future framework, the proposal also includes the already established EU fleet wide targets for 2020/2021 of 95 g CO2/km for passenger cars and 147 g CO2/km for light commercial vehicles, both of which are based on the NEDC (New European Driving Cycle) test procedure. Starting from 2021, the emission targets will be based on the new emissions test procedure, the Worldwide Harmonized Light Vehicle Test Procedure (WLTP), which was introduced last year. The Commission notes that as the WLTP test procedure will be phased in over the next years, the newly proposed 2025 and 2030 fleet wide targets are not defined as absolute values (in g CO2/km), but expressed as percentage reductions compared to the average of the specific emission targets for 2021.
  • Battery Research: Between 2007  and  2015,  the  Commission  has  invested  €375  million  in  135 research and innovation projects on battery technologies. Between 2018 and 2020, the  Commission  will  invest  an  additional  €200  million  from  the  Horizon  2020 program to support the development and production in Europe of the next generation of electric batteries. A comprehensive roadmap for an EU Battery Alliance will be presented in February 2018, at the Clean Energy Industrial Forum, as part of the EU Industry Days.
  • Alternative Fuels (Directive 2014/84/EU): “With around  95%  of  road  vehicles  still  conventionally  fuelled,  including  renewable biofuels  blends, the number of vehicles, and  vessels, running on alternative energies in the  EU  is  too  low,” states the Commission in the Communication from the Commission to the Parliament and Council on Alternative Fuels Infrastructure Action Plan. The Commission’s analysis of infrastructure needs through 2025 revealed the following:
    • Electricity: Up to €904 million by 2020.
    • CNG: Up to €357 million by 2020 and up to €600 million by 2025 for CNG road vehicles.
    • LNG: Up to €257 million by 2025 for LNG road vehicles. For LNG for waterborne transport, up to €945 million in the trans-European transport network (TEN-T) Core Network  Corridor seaports by 2025 and up to €1 billion in the TEN-T Core Network  Corridor inland ports by 2030.
    • Hydrogen: Up to €707 million by 2025.

All told, the total estimated investment needs for publicly-accessible alternative fuels infrastructure in the EU amount to about €5.2 billion by 2020 and additional €16 billion to €22 billion by 2025. The Commission plans to fund just €800 million to further ramp up the rollout of alternative fuels infrastructure.  Funding from Member States has clearly fallen short so far. My question is, what’s going to change that? And the other provisions seem more suggestive than actually directive. They include initiatives like information sharing and collaboration. I question how the Member States will respond, given how unevenly and even sluggishly they’ve responded so far.

Indeed, only 8 Member State National Policy Frameworks (NPFs) fully meet the Commission’s requirements under the original Directive. The Commission notes other NPFs “are not coherent from an EU perspective in terms of the priorities they set and how ambitious they are with regard to different alternative fuels.” And two still haven’t submitted NPFs at all.

  • Updates to the Clean Vehicles Directive (2009/33/EU): The Commission notes in a summary of its impact assessment of the issues that the Directive has delivered “only marginally on its main objective, namely to stimulate public procurement of clean (low-and zero-emission and other alternative fuels) vehicles.” The reason is the limited scope of the Directive and unclear provisions when it was first promulgated. The updates to the Directive clarifies the definition of clean vehicles based on emission thresholds and sets up minimum procurement targets for light-duty vehicles and combining it with a definition based on alternative fuels. It also sets up minimum procurement targets for heavy-duty vehicles.

The proposal will now be considered by the European Council and Parliament, which will suggest their own changes before a final compromise is struck in early 2019.

 

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.