UK: UK Consultation On EU Proposal For Compulsory CO2 Targets For New Cars

Last Updated: 29 July 2008
Article by Paul Sheridan and Olivia Quaid

On 10 July 2008 the UK Government launched a consultation on the European Commission's (the "Commission") proposal for a regulation to introduce compulsory CO2 targets for new passenger cars from January 2012. Save for certain exceptions (detailed below), the proposed target is to achieve 130g CO2/km as the fleet average for each car manufacturer for all new cars registered in the EU by 2012. At the same time, following the King Review ( see previous article), the Government is pressing the Commission to set a target of 100g CO2/km by 2020. The consultation closes on 3 October 2008. A copy of the consultation document is available here.

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Full Article

On 10 July 2008 the UK Government launched a consultation on the European Commission's (the "Commission") proposal for a regulation to introduce compulsory CO2 targets for new passenger cars from January 2012. Save for certain exceptions (detailed below), the proposed target is to achieve 130g CO2/km as the fleet average for each car manufacturer for all new cars registered in the EU by 2012. At the same time, following the King Review ( see previous article ), the Government is pressing the Commission to set a target of 100g CO2/km by 2020. The consultation closes on 3 October 2008. A copy of the consultation document is available here.

The aim of the Commission's proposal

To reduce road transport derived CO2 emissions through improved the fuel efficiency of new cars sold in the EU thereby contributing to the EU's Kyoto targets and to accelerate the move to lower carbon technologies in the automotive sector. The Commission proposes that a further 10% reduction may be achieved through other measures.

Key parts of the proposal

The Commission's proposal for a Regulation (COM(2007) 856 final) published in December 2007 is intended to apply to passenger cars (excluding certain special purpose vehicles) which have not previously been registered outside the Community (a registration outside the Community less than 3 months before registration in the Community shall not be taken into account and therefore the Regulation will apply to such vehicles). The approach differentiates between the use or utility of vehicles. Annex 1 of the draft Regulation sets out a utility formula that provides a "specified emissions target" of a car of a given mass or weight in kg. The manufacturer's target in a particular calendar year will be the average of the permitted "specific emissions target" of all cars sold by that manufacturer in that calendar year. The present intention is that whilst manufacturers of heavier cars will have higher CO2 emission targets than lighter cars they will be required to make more effort to obtain the reduction from current levels.

The Commission will conduct a review of CO2 emissions in 2010 and if there has been an increase in the average weight of vehicles between 2006 and 2009 the formula will be amended to ensure that the overall target reduction will be met.

Two or more manufacturers (whether companies owned by the same holding company or independent companies) may create a "pool" for a 5 calendar year period, to be renewable thereafter, whereby they are together treated as one manufacturer and the higher emissions from one may be offset against lower emissions of the other. There are certain notification and filing provisions surrounding such action. Further, in order to avoid creating competitive imbalance between different car manufacturers, it is envisaged that manufacturers which register in the EU less than 10,000 new passenger cars a year and which are not connected (in terms of corporate structure) to another manufacturer may apply to the Commission for a derogation from their individual emission target for 5 calendar years. In such circumstances the particular manufacturer will have to propose, for agreement by the Commission, its own specific target.

Compliance with the targets will be judged retrospectively so that, for example, in 2013 CO2 new car data and data on the weight of vehicles sold in the previous year will be reviewed to calculate the manufacturer's target for 2012. Penalties for non compliance with the manufacturer's target (known as excess emissions premiums or "EEP"s) on the basis of per car/per gram of CO2, will start at €20 in 2012, €35 in 2013, €60 in 2014 and €95 from 2015. Any revenues will be paid to the Commission and used as part of the general EU budget.

In addition from January 2010 Member States must collect data on registrations and emissions of new cars sold within their territories. Also any labels, posters or promotional literature relating to new cars must contain information on how much that car is above or below the specific CO2 emissions target.

Present status of the Commission's proposal

The draft Regulation is being debated in the European Parliament and Council and therefore is subject to potential change. A joint declaration by France and Germany in June 2008 supported the target but sought a substantial phasing in period beyond that which is proposed by the Commission. In October 2007 the European Parliament stated that the target should be revised to 125g/km by 2015 and 95g/km by 2020. It is anticipated that a vote on amendments will take place in October or November 2008.

The UK Government's view on the proposal

The UK Government considers that the penalty regime proposed is too lenient in the early years to incentivise change by manufacturers and thus will mean that the 130g/km target will not be met until 2015 when the EEP is at €95 per gram/per car. It is therefore pressing for reconsideration of the penalty phasing. It is also seeking a provision to enable niche manufacturers which produce a narrow range of cars (and are potentially exposed to disproportionate targets and costs in the absence of a pool arrangement) to be able to choose a target which will require greater CO2 reductions than the industry average but be more in line with the level of targets provided to other manufacturers.

The UK Consultation

The queries posed on consultation are wide ranging and include probing the use of assumptions about whether manufacturers will pass 100% of the costs to consumers; whether there will be an increase in the proportion of diesel vehicles over and above the increase already forecast; whether there should be provisions for niche manufacturers; whether a trading scheme should be incorporated; if there are any factors likely to influence the ability of manufacturers to meet the target that have not been taken into account and whether longer term measures should be introduced.

The consultation highlights the fact that due to active debate at European level over the summer period the UK may revise its negotiating position during the consultation period and therefore any responses are encouraged as soon as possible rather than by the deadline. Details of how written responses should be addressed and contact details are provided in the consultation document.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/07/2008.

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