Several automakers weigh emissions pooling to meet 2025 CO₂ targets

Tensions are rising over next year’s new EU CO2 emission targets for the auto industry. Backed by Germany, France is pushing the European Commission to postpone the targets by one year. However, the Brussels administration maintains a firm stance.

Without delay, car makers will need a significant uptick in electric car sales next year. However, according to the International Council on Clean Transportation (ICCT), some are receptive to the alternative path: emissions pooling.

“We want to keep our decarbonization goals but also find solutions for our ailing car industry.” Those are the words of the French Minister of Industry Marc Ferracci, reacting on why his government favors postponing the European CO2 average of 94 grams for car makers’ fleets to 2026.

To some surprise, he found an ally in Germany’s Secretary of Stare Bernhard Klüttig – though internally, Berlin remains divided on the matter, and despite two big nations sounding the alarm bell, the European Union’s Climate Commissioner, Wopke Hoekstra, confirmed that the ship would not alter its course.

Dim outlook over stagnating EV sales

So, car makers like Volkswagen, which needs to leapfrog EV sales from 13% to 30% next year, or Mercedes-Benz, in need of 11% more zero-emission sales, face the prospect of significant fines as every exceeded gram per car model is sanctioned by 95 euros.

This could account for millions of euros per brand. For the French, the outlook isn’t much different. Further data from the ICCT show that Renault-Nissan-Mitsubishi needs to accelerate EV sales by 14% (more than double) and Stellantis by 8% to meet the goals. Only Volvo is already on target (33% EV share). Currently, European EV sales are stagnating around 14%.

But there’s a softer option than coughing up money for sanctions. Automakers are exploring emissions pooling as a strategy to avoid these fines. Major players have yet to announce plans to pool, but the ICCT looked into plausible scenarios.

Documents from early November show that while no large automotive groups have committed to pooling for compliance, smaller automakers such as Suzuki and Mazda are pursuing partnerships with Volvo and Toyota, respectively, to improve their emissions profiles.

Renault and Volkswagen receptive to pooling

According to the ICCT, Volkswagen Group and Renault Group have both recently signaled openness to pooling. In late October, VW CFO Arno Antlitz said that while VW aims to meet its emissions goals independently, pooling with other manufacturers remains an option.

Renault CEO Luca de Meo echoed this stance earlier in October, expressing a preference for pooling over paying EU fines. He calculated earlier that the penalties could total up to 15 billion euros for the auto industry.

To achieve compliance, the ICCT estimates that manufacturers will need to reduce their fleet emissions by 12% between the years 2023 and 2025, from 107 g/km to 94 g/km, assuming no further developments in internal combustion engine efficiency.

The report highlights hypothetical pools—like VW-Tesla or Toyota-Renault—that could provide mutual benefits in emissions compliance. In fact, emissions pooling was one of the major drivers behind Tesla’s profitability resurgence during the third quarter of this year.

Suzuki chooses Volvo over Toyota

Emissions pooling also comes at a cost, but it tends to be less expensive than paying penalties, allowing manufacturers to leverage each other’s strengths. In 2020-21, pooling helped several automakers meet targets, though some—including VW Group, Suzuki, and Jaguar Land Rover—still faced fines exceeding €500 million collectively.

The European Commission confirmed that no major new pools are in place for 2025 as of early November, but Suzuki recently confirmed that it would partner with Volvo instead of Toyota. Suzuki’s decision was strategic, as Volvo’s strong EV sales offer better emissions reductions than Toyota’s, which leans more toward hybrid models.

The ICCT’s report suggests that the 2025 targets are within reach if automakers employ multiple strategies: increasing BEV sales, enhancing ICE and mild hybrid efficiency, promoting plug-in hybrid models, and forming compliance pools. Automakers like Stellantis are cutting ICE production to prioritize EVs, while BMW has confirmed it is on track to meet its targets.