EU CO2 Emission Performance Standards for New Passenger Cars and Vans

EU CO2 Emission Performance Standards for New Passenger Cars and Vans

The European Union has implemented regulations to reduce CO2 emissions from new passenger cars and vans. These regulations are crucial in achieving the EU’s climate targets, including a 55% reduction in emissions by 2030 and climate neutrality by 2050.

Overview of Current Regulations

Passenger cars and light commercial vehicles account for approximately 19% of total EU territorial CO2 emissions. The current regulation, updated in April 2023, sets stringent CO2 emission performance standards for new vehicles. Key provisions include:

• Annual emissions targets for new cars and vans from 2025
• 100% emission reduction target (zero tailpipe emissions) from 2035 onwards
• Financial penalties for manufacturers who fail to comply

Industry Lobbying and Proposed Amendments

Despite the regulation being in place, some automobile companies are advocating for amendments to make it less stringent. In response to industry lobbying, the European Commission has proposed a targeted amendment to the regulation. The proposed changes include:

1. Shifting from annual compliance to a three-year average compliance for 2025-2027
2. Allowing manufacturers to ‘bank’ or ‘borrow’ emissions credits during this period

The Commission argues that this flexibility will help the industry invest in the clean transition while maintaining the overall emissions targets.

Policy Timeline

• Q4 2022: EU institutions reached an in-principle agreement on amendments to the regulation
• Q1-Q2 2023: Formal agreement was delayed due to lobbying efforts, particularly from Germany
• Q2 2023: EU institutions formally agreed on the amendments
• Q1 – Q4 2025: Strengthened annual emissions standards apply
• Q2 2025: Commission proposed a new amendment to allow three-year average compliance
• 2026: Commission to review the regulation’s effectiveness

Background and Specific Emissions Targets

The regulation sets EU-fleet wide CO2 emissions targets and specific targets for each manufacturer. The targets are as follows:

• From 2025: 15% reduction in CO2 emissions compared to 2021 targets
• From 2030: 55% reduction for cars and 50% for vans
• From 2035: 100% reduction (0 g CO2/km)

Manufacturers exceeding their emissions targets must pay €95 per g/km of excess emissions for each new vehicle registered.

Stakeholder Perspectives

• European Commission: Supports maintaining current targets while providing short-term flexibility
• EU Member States: Positions vary, with some countries previously expressing reservations
• European Parliament: Divided on the issue, with some supporting the Commission’s approach and others calling for a fundamental reassessment

The IIGCC supports the ambition of the current regulation and sees the maintenance of the 2035 date for 100% emissions reductions as critical for investor certainty. The ongoing developments in this policy area highlight the complex interplay between climate regulation and industry interests.