EU plans to weaken consequences of its CO2 targets (update)

According to EU Commission President Ursula von der Leyen, Brussels could weaken the CO2 target for car manufacturers in 2025. It is also holding out the prospect of a new battery subsidy. She explained that she wanted manufacturers to achieve the CO2 target over the next three years instead of this year, as initially planned, provided that Parliament and the member states agreed.

For some time already, some called for the CO2 fleet limits to be weakened to spare car manufacturers, who are under economic pressure, from potentially billions in fines if they fail to meet the targets. One possibility that came into play early on was that the CO2 target itself would remain in place, but manufacturers would be able to offset any overruns in 2025 against future underruns.

No annual compliance anymore

That’s the kind of construct we’re now looking at. “Instead of annual compliance, companies will get three years. This is the principle of banking and borrowing; the targets stay the same; they must fulfill them,” says von der Leyen.

“There is a clear demand for more flexibility on CO2 targets,” she continues. “The key principle here is balance. On the one hand, we need predictability and fairness for first movers, those who did their homework successfully. That means that we have to stick to the agreed targets.”

“On the other hand, we need to listen to the voices of the stakeholders that ask for more pragmatism in these difficult times, and technology neutrality.” However, there is no precise regulation yet; the Commission President wants to “propose a focused amendment to the CO2 Standards Regulation this month.”

Von der Leyen has also signaled that she will open a possible back door for car manufacturers to the decision to phase out fossil-fuelled combustion engines from 2035. She wants to “speed up work on the 2035 review, with full technology neutrality as a core principle.”

More details are expected on Wednesday, when Transport Commissioner Apostolos Tzitzikostas will present the action plan for the automotive industry.

First reactions: positive…

Of course, the Association of European Car manufacturers (ACEA) and most European car manufacturers have welcomed the initiative. Other onlookers, like environmental organisations, are less enthusiastic.

“The transformation of our automotive industry is in full swing, and now we must define a framework that ensures the EU’s competitiveness in this critical sector, says Ola Källenius, President of ACEA and CEO of Mercedes-Benz.

“The transition to zero emission mobility and a thriving EU automotive industry must progress together, this is non-negotiable. We appreciate the focus on accelerating autonomous driving deployment and the proposed CO2 relief measures for 2025 for passenger cars and vans,” he adds.

“But let me be clear about our primary concern: How do we chart the course to 2035 with the necessary flexibility and pragmatism to make this transition work? We want to address this fundamental question with the Commission President during the next Strategic Dialogue meeting,” he concludes.

Car manufacturing group Stellantis has also reacted: “Stellantis welcomes the announcement by Commission President von der Leyen. This is a meaningful first step in the right direction to preserve  the competitiveness  of our sector while remaining faithful to the targets and committed to electrification.” Other car manufacturers, like the VW Group, responded similarly.

The reaction of Stellantis is quite peculiar. After all, not so long ago, they were the ones who were not happy with such a postponement because “they had done their homework.” BMW Group also said that it had no problems with the timing of the tariffs. They have been very busy negotiating and persuading at ACEA now that Stellantis has joined the club again.

…and negative

Of course, there are also the reactions of the ‘other side’. The NGO Transport and Environment (T&E)  sees von der Leyen’s move as “an unprecedented gift to Europe’s car industry in the middle of a compliance year.”

William Todts, executive director of T&E and participant in the EU Automotive Dialogue, reacts: “Weakening the EU clean car rules rewards laggards and does little for Europe’s car industry except to leave it further behind China on electric vehicles. The EU risks creating very damaging uncertainty about the electric vehicle transition in Europe.”

T&E stipulates that the current 2025 CO2 target is well within the reach of European carmakers, as they tried to prove in their survey a few months ago. “The European carmakers still have until the end of the year to comply. By changing the compliance window to three years, car manufacturers will be under less pressure to supply more affordable models such as the Renault R5 and Citroën ëC3, both of which were timed to help meet the 2025 target.”

“So, we expect an automotive action plan that restores confidence and puts Europe and its industry back on track towards 100% emission-free cars in 2035,” Todts concludes.

Peter Mock, Europe Director of the International Council on Clean Transportation (ICCT), has also strongly criticized the Commission’s plans. “This last-minute weakening of climate targets will influence manufacturers’ market strategies in the initial years and likely will delay the availability of affordable  electric cars for consumers.”

Car manufacturers that are only producing electric cars are, of course, joining the critical voices. Polestar CEO Michale Lohscheller voices their reactions: “The people of Europe are ahead of politics: In January, EV sales were 34% higher than the previous year. Many carmakers have done their homework and invested in zero-emission vehicles to make a decisive contribution in the fight against climate change.”

“By giving carmakers who fail to meet the targets more time, the EU Commission risks the competitiveness of its automotive industry. Polestar remains committed and continues to do the right things. For the environment, the people, and to be competitive in a global industry.”