How Car Makers Are Skirting Emissions Regulations
While many nations, including Ireland, have introduced legislation to end the sale of petrol and diesel cars from 2030 (or later), it is imperative that car manufacturers are held accountable for the emissions of the cars that they produce in the meantime.
This is evidently clear in the fact that carbon emissions fell across all sectors in 2020 except for one – SUVs.
In fact, the International Energy Agency estimates that the increase in SUVs cancelled out the decline in oil consumption that resulted from lockdown measures during the Covid-19 pandemic.
While the European Union has implemented stringent measures to reduce CO2 emissions in the automotive industry, manufacturers have found a way to get around these restrictions.
Today we discuss the topic of emissions pooling, and what it means for the Climate Crisis.
Putting a Price On Emissions
Under EU regulations, new passenger cars must not emit more than 95g of CO2 per kilometre driven.
This is averaged across all of the car models that are sold by a single manufacturer, and if they exceed the limit, the will face a fine of €95 for every gram of CO2 over the limit multiplied by the number of new cars sold in the year.
As such, many established car manufacturers who have been slow to make the transition to selling electric cars, will face multibillion-euro fines over the next few years.
Interestingly, if the fleet of models is above average weight, the CO2 target can be slightly higher – perhaps giving an insight into why so many manufacturers are pushing SUV sales so hard.
Note also that these targets do not include the emissions from manufacture or the shipping of new cars.
What Is Emissions Pooling?
To avoid the fines for missing emissions targets, many car manufacturers are forming CO2 pools to artificially bring down their total emissions figures.
SUVs have driven the second highest growth in emissions worldwide, as automotive manufacturers have increasingly marketed these vehicles
Pooling enables those brands with the highest CO2 emissions to group their cars with another company that has significantly lower – or no – emissions across its fleet.
While this isn’t illegal, it demonstrates the extent to which so many manufacturers have disregarded their emissions obligations, and that they are only now taking action in order to avoid hefty fines, rather than for the betterment of human health or to tackle the Climate Crisis.
A prime example of this is the deal between the Fiat Chrysler Automobile (FCAU) group and Tesla, which saw FCAU pay €1.8bn to buy emissions credits from the all-electric manufacturer in order to meet its emissions quota, as reported by the Financial Times.
In fact, in the second quarter of 2020, sales of EV credits to other car manufacturers comprised 7% of Tesla’s total revenue – totalling $428m (€352m), according to CNBC.
“If OEMs were to miss their CO2 target, it looks very bad in marketing terms. It’s becoming more and more important for CEOs presenting their results to say whether they are CO2 compliant or no.”
In the last quarter of 2020 alone, Honda, VW, Ford, and Daimler all entered pooling deals with other manufacturers as they scrambled to avoid fines for how polluting their fleets were. This is on top of pre-existing pooling deals like the one between Toyota and Mazda.
Automotive manufacturers aren’t doing this out of the kindness of their hearts, they are doing this because it is the cheapest option, and because it maintains the reputation of their brand.
Matthias Schmidt, an automotive analyst and publisher of the European Electric Car Report, commented the following in an interview with Yahoo Finance: “If OEMs were to miss their CO2 target, it looks very bad in marketing terms. It’s becoming more and more important for CEOs presenting their results to say whether they are CO2 compliant or no.”
Climate Crisis Impact
The targets set by the EU are necessary to avert the worst outcomes of the Climate Crisis.
While many campaigners say that these emissions restrictions don’t go far enough, these represent the bare minimum that a car manufacturer should be meeting. The fact that they are not and that they are willing to pay billions of euros to avoid substantially larger fines should be alarming.
This graph demonstrates just how drastic our action on the Climate Crisis needs to be if we are to avert the worst-case outcomes. Credit: IPCC
Pooling does not magically make the cars any less polluting.
It will not make any impact on the 500,000 early and avoidable deaths in the EU each year from air pollution, and nor will it help us to avoid the rising sea levels, the increase in droughts, forest fires, flash floods or crop failures that the Climate Crisis is already bringing.
In short, allowing emissions pooling is antithetical to the very purpose of these emissions targets.
As a result, the European Commission announced in September 2020 that it will seek further reductions in CO2 emissions from passenger cars by 2030.
This may require manufacturers to cut their CO2 emissions by as much as 50% compared to a 2021 baseline.
The Commission has pledged to review the EU’s energy and climate rules by July 2021.
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