EU emission regulations postpone the electric car revolution

European Parliament

EU (European Union) emission regulations are currently delaying the electric car revolution in Europe, I’ll show you why in this article. This is a subject that some EV enthusiasts are already aware of and I wanted to address before, but never had the patience to write it down in an article. No more excuses, today is the day to do it.

Let’s see some highlights of important EU emission policies for new passenger cars for the coming years.

 

Regulation (EC) No 443/2009

 

2021 target

From 2021, phased in from 2020, the EU fleet-wide average emission target for new cars will be 95 g CO2/km.

This emission level corresponds to a fuel consumption of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel.

A phase-in period will also apply to the target of 95 g/km. In 2020, the emission targets will apply for each manufacturer’s 95% least emitting new cars. From 2021 on, the average emissions of all newly registered cars of a manufacturer will have to be below the target.

 

Penalty payments for excess emissions

From 2019 on, the penalty will be €95 for each g/km of target exceedance.

 

Penalty payments for excess emissions, table made by JATO

 

While the unrealistic and outdated test cycle NEDC is still used to measure CO2 emissions in these targets for 2020 and 2021, the policies seem very positive. Electric car sales will definitely grow exponentially in 2020 and even more in 2021, the electric car revolution is coming right?

Not so fast, let’s see what automakers are planing for 2020 regarding production of electric cars.

 

Gap between EV sales needed and production planned for 2020, chart made by Transport & Environment

 

As you can see, most automakers only plan to produce the electric cars required to avoid EU fines, some will even prefer to pay those fines than actually sell enough electric cars. This happens for a simple reason, to game the regulation that sets the CO2 emission targets for 2025 and 2030.

 

Regulation (EU) 2019/631

 

Target levels

New EU fleet-wide CO2 emission targets are set for the years 2025 and 2030, both for newly registered passenger cars and newly registered vans.

These targets are defined as a percentage reduction from the 2021 starting points:

  • Cars: 15% reduction from 2025 on and 37.5% reduction from 2030 on
  • Vans: 15% reduction from 2025 on and 31% reduction from 2030 on

The specific emission targets for manufacturers to comply with, are based on the EU fleet-wide targets, taking into account the average test mass of a manufacturer’s newly registered vehicles.

 

The new regulation sets the CO2 emission targets for 2025 and 2030 using the more realistic test cycle WLTP. However, the problem with this regulation is that the emission targets won’t be calculated in relation to the previous targets, instead they will be redefined by the emissions of CO2 of all new vehicles registered in 2021. Therefore, automakers aren’t interested in contributing to have a lower starting point in 2021 by selling more electric cars than they need to avoid fines.

Let’s see examples of some different scenarios.

A

If in 2021 the average CO2 emission from new registered passenger car is 105 g/km, it means that the target for 2025 will be 89,25 g/km and 65,625 g/km for 2030.

B

If in 2021 the average CO2 emission from new registered passenger car is 95 g/km, it means that the target for 2025 will be 80,75 g/km and 59,375 g/km for 2030.

C

However, if automakers sell a lot of electric cars in 2021, then the starting point will be lower and it will contribute for more demanding targets in 2025 and 2030, something that automakers don’t want.

Imagine if in 2021 thanks to electric car sales, the average CO2 emission from new passenger car registered is 85 g/km, it would mean that the target for 2025 would be 72,25 g/km and 53,125 g/km for 2030.

 

Summing up, because of how CO2 emission targets for 2025 and 2030 will be calculated, some legacy automakers will prefer to pay fines for a few years (2020 and 2021) than to risk reducing – more than they need to – the average CO2 emissions from new passenger cars in 2021. This means that in the coming years we’ll see the announcement of many new electric cars, but don’t expect availability to be great in EU countries, at least not until 2022.

 

Bonus

For Spanish and Portuguese readers I highly recommend the following video, it’s spot on about legacy automakers behavior towards EU emission regulations.

 

 

More info:

https://ec.europa.eu/clima/policies/transport/vehicles/regulation_en

https://ec.europa.eu/clima/policies/transport/vehicles/regulation_en

https://www.jato.com/2021-co2-targets-would-generate-e34-billion-euros-in-penalty-payments-within-europe/

https://www.transportenvironment.org/press/one-million-evs-be-sold-next-year-europe-alone

https://forococheselectricos.com/2019/09/kia-espana-dejara-de-coger-pedidos-de-sus-coches-electricos-e-hibridos-enchufables-el-1-de-octubre-para-cumplir-las-normas-de-emisiones-en-2020.html

This Post Has 14 Comments

  1. Interesting but surely the 2025 level, albeit set as a percentage of 2021 level, is as a percentage of 2021 market level, rather than individual carmaker average? Or am I mistaken? If so, much harder to collude. So, they may well choose to pay fines in 2020 and 2021, but 2021 level will be based on market average (and WLTP emissions rather than NEDC). I suppose VW is large enough to move the dial, small manufacturers aren’t (whatever say Volvo does has little impact on emission average).

    1. As I understand it the targets are EU fleet-wide. You can see in the chart made by Transport & Environment that legacy automakers’ production goals of electric cars are very disappointing.

      My hope is that in 2021 at least 1 million BEVs are sold in Europe, that would make a big difference to set decent emission targets for 2025 and 2030. Unfortunately, while Tesla’s European Gigafactory is expected to start production in 2021, 2022 is more likely.

      https://www.teslarati.com/tesla-gigafactory-4-europe-production-2021/

      We probably need the arrival of Chinese automakers to reach 1 million BEVs in 2021. They and Tesla are the ones that can mess with European automakers’ plans to game the new regulation.

  2. no matter what the car companies want, from 2021 for safety reasons we will have the robotaxis that for economic reasons will have to be electric

  3. Great analysis of the situation in Europe, thanks Pedro!

  4. Thanks Pedro, your insights wether batteries or politics are much appreciated. You have a gift to unveil us the wheat from the chaff at every article and at every comment.

    Tired of the lack of compromise against climate change of European car makers. My next car could be Chinese. Just want my money help accelerate electrification, not help with manufacturers compliance.

  5. Hi Pedro,

    There are additional challenges and opportunities.

    For example the listed WLTP-based emission on new cars will be declared values by manufacturers instead of measured values. For checking compliance the EU can take the average emissions of 3 randomly selected production cars of a certain type and this should by lower than the manufacturer declared value. Currently some manufacturers are declaring inflated values to be on the safe side (and also for the reasons described in your story).

    However some countries (like the Netherlands were I live) have CO2-based sales tax, on a progressive scale. For instance CO2-tax on a Mercedes A180 (123 gr CO2/km) is €5.600,- and on a GLE 53 AMG (212 gr CO2/km) it’s a whopping €35.400,-. So in the Netherlands inflating declared CO2-values will increase the consumer prices quite dramatically and thus hurt sales. There is an opportunity for makers of low-emission vehicles to gain market share.

    So it’s a mixed bag, but it would really help if a big market like Germany would implement some form of progressive CO2-based taxation scheme (or some comparible measure) to push manufacturers towards low/zero-emission vehicles.

    1. Hi Leo, thanks for the input. That’s good policy in Netherlands, but I don’t see Germany implement something like that. They think they are protecting their industry, but actually they are hurting it by delaying its modernization.

  6. This is a great article and should be required reading, not just for EV enthusiasts, but policy makers.

  7. Europe is just a fraction of consumers around the world. American, Chinese, Japanese, Koreans are not bound by EU rules. Let’s see if they get an advantage on their markets because of this gamble.

  8. Pedro, I never made the connection between the 2021 fleet average and the 2025 and 2030 mandates
    Thanks for explaining.

    About the number of BEV sold in 2021, I am more optimistic without really running the numbers.
    With VAG introducing the MEB platform models plus their Triplets sales, PSA with the 208, Corsa, 2008, and other EVs, Nissan and Renault each over 100.000 and the many PHEV they are launching it can be a bloodbath for the CO2/kg average.

    It will be kind of a prisoners dilemma. A car maker has to pay the fine not for its own benefit, but for the benefit of all. And it can be completely for nothing if another car maker sells too much BEV, or just cars with low CO2/kg.

  9. I more optimistic. I understand the conecttion between the 2021 emissions and 2025 and 2030 mandates, but if a big player like VW goes all in BEV, the others will follow. And the idea of collusion until 2025 is not realistic, because fines are not the same for all.

    1. Why do you think that Volkswagen is going all in? The ID.3 will not be delivered before the middle of next year and price is close to that of a Tesla Model 3, at least the ID.3 1st starts at almost 45.000 Euros (335.000 DKK) in Denmark. Volkswagen may already next year have BEV to account for 1 percent of their total car production. Volkswagen still makes the most money by selling ICEV and they will only sell as many BEV as they need to avoid the penalties.
      The base ID.3 with the smallest battery of 45 kWh will be priced below 30.000 Euros in Germany, in Denmark the starting price is announced to be over 37.000 Euros (280.000 DKK).

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