T&E analysis contradicts car lobby laments on EU CO2 targets (update)

The environmental NGO Transport & Environment (T&E) has responded to the increasing pressure of the car manufacturers’ lobby regarding the 2025 EU CO2 emission targets with an analysis proving that the industry can achieve the goals and avoid the fines pending for 2025. The European Commission seems to be on the same line.

Last week, the biggest political group in the European Parliament, the European People’s Party, changed its standpoint on the EU CO2 emission targets for 2025 and urged for postponement of the regulations and fines as asked by the European Association of Car Manufacturers (ACEA).

The EPP also conceded in another lament of the car manufacturers, demanding that the ICE ban on new cars provided for 2035 be postponed and that ICE cars still be admitted if they can reach the CO2 targets set for transport in the future.

€15 billion

The right-wing parties in the European Parliament’s turnaround on the CO2 targets has been fueled by the car sector’s prediction that manufacturers would have to pay €15 billion in fines next year for not meeting them. T&E now claims that this sector analysis is fundamentally flawed because it estimates 2025 sanctions based on the first half of 2024 car sales.

“Using 2024 car sales data to calculate the 2025 penalty is like judging an athlete’s performance in a championship based on their practice sessions the year before,” says T&E. “The athletes reserve their best effort for the actual event, just as carmakers strategically align sales and compliance measures to meet regulatory deadlines.”

T&E continues: “The industry has been preparing for the 2025 target since it was first announced in 2017.
There has been little incentive for carmakers to sell more EVs this year, especially if doing so means that they can’t sell those EVs again to consumers in 2025.”

“The situation mirrors 2019 when OEMs improved CO2 performance by up to 20 g CO2/km in a single year. Privately, carmakers have since acknowledged they were holding back sales in the year before new targets to shift volumes into the compliance year.”

“As with past car CO₂ targets, carmakers are expected to close their compliance gap in the target year rather than ahead of time. As a result, the year 2024 is unrepresentative of the state of the market. Most models designed to comply with the target, notably more affordable EV models, have not yet rolled off production lines.”

“It is profoundly concerning that critical debates on the future of one of the EU’s most important climate regulations are driven by such flawed arguments,” T&E concludes.

Achievable and realistic

T&E analysis shows that the EU’s 2025 car CO2 target is both achievable and realistic, and carmakers are unlikely to face any penalties in 2025. Manufacturers are expected to comply using a wide range of strategies. The compliance options include increasing sales of fully electric cars, mild and full hybrids, and plug-in hybrids, as well as various compliance flexibilities like pooling (or buying EV credits from other carmakers) and both the zero and low-emission vehicle bonus and eco-innovation credits.

Even in the worst-case scenario, where carmakers fail to meet their production plans, total penalties are projected to remain below €1 billion, with Volkswagen Group accounting for the lion’s share. This projection is based on conservative EV sales estimates from GlobalData, with Volkswagen selling around 15% of EVs in 2025 and pooling with Tesla.

According to T&E, Volkswagen could avoid the penalty by increasing EV sales to 17% (while still pooling) and 22% EV sales would allow it to fully meet its target without pooling.

Not the same target for everyone

The analysis also wrongly assumes a fixed target of 95 g CO2/km for all manufacturers in 2025. In reality, each carmaker’s target varies, as it is individually adjusted.  These adjustments are based on the average mass of the cars sold in 2025 and the bonuses from the zero and low-emission benchmark, which weakens targets for carmakers who sell a certain number of EVs.

The table shows that the expected targets range from 90 g CO2/km for Volvo to 97 g CO2/km for Stellantis (without pooling).

Former Stellantis boss Carlos Tavares, who left his position earlier than foreseen, fiercely advocated retaining the EU CO2 targets for 2025, as scheduled. Last week, he was joined by BMW Group CEO Oliver Zipse, who spoke out against delaying the targets for 2025.

At the same time, Zipse continued to argue in favor of remaining open to different technologies in 2035, faithful to the ‘multi-path’ road BMW has chosen for the future. However, Zipse sees electric cars as having the most significant growth potential.

Vision of the Commission

Recently, the European Commission reiterated that it’s not considering changing Europe’s policies on car CO2 targets. Asked whether he was now considering changing the car CO2 rules, European Union climate commissioner Wopke Hoekstra said he was not.