EU Proposes Large Cut to Auto CO2 Emissions by 2020
07/11/2012| 11:16am US/Eastern
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-- EU proposes to limit average CO2 emissions by passenger cars to 95 g/km by 2020
-- Proposal comes as EU car sales hit record lows
-- Auto industry says plan undermines competitiveness
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BRUSSELS--The European Union proposed Wednesday to further limit greenhouse gas emissions from cars by 2020, stirring unease in an industry already suffering from a slump in demand and production overcapacity.
The European Commission, which has executive powers in the EU, proposed limiting carbon dioxide emissions to an average of 95 grams per kilometer starting in 2020, down from a target of 130 grams already set for 2015. Last year, passenger cars emitted an average of 135.7 grams of CO2 per kilometer, the commission said in a statement.
The commission is seeking to give more long-term certainty about EU efforts in fighting climate change to one of the most hydrocarbon-dependent sectors of its economy. But the proposal comes at a critical time for an industry that, given the number of people it employs, is very influential within the 27-nation bloc.
Auto makers in Europe are selling about 20% fewer cars than they were in 2007, leaving many with mounting losses and far more plants, workers and production equipment than they can keep busy.
Car sales in Europe have been shrinking for years and are expected to fall to a 17-year low in 2012. The so-called volume manufacturers--the likes of Italy's Fiat SpA (>> Fiat SpA) and General Motors Co. (>> General Motors Company) Opel unit--are struggling with excess production capacity and face competition from Asian brands like Hyundai Motor Co. Ltd. (>> Hyundai Motor Co) and Kia Motors Corp. (>> Kia Motors Corporation), which are boosting their share of the European market.
But at the same time, profits at German premium makers such as BMW AG (>> Bayerische Motoren Werke AG) and Daimler AG (>> Daimler AG) are on the rise and their sales are much more stable, mirroring the divergence of the country's economic performance from that of other EU countries.
In the first five months of the year, Daimler's sales rose by 1.1% while Fiat's fell by 17% compared with the year earlier. Kia's sales increased by 25%.
The emissions target "will increase manufacturing costs in Europe, creating a competitive disadvantage for the region and further slowing the renewal of the fleet," said ACEA, the European association of automobile manufacturers, in a statement. "In the context of declining car sales for the past five years running, the proposed targets would place an extra strain on manufacturers," it said.
The commission defended its proposal, saying that it will boost technological innovation.
"We are not only protecting the climate and saving consumers money, we are also boosting innovation and competitiveness in the European automotive industry," said Connie Hedegaard, the EU commissioner for climate action.
The CO2 targets are an average across the whole EU car fleet, with each manufacturer having a specific goal based on the average weight of the vehicles it makes. That is encouraging producers of big cars to look for ways to decrease that average.
BMW, famed for its high-performance cars, recently stepped up plans to introduce two new models--an electric urban car and a hybrid sports car--that will help the company push down its average emissions.
BMW sales chief Ian Robertson recently told Dow Jones Newswires that the new cars would allow BMW keep cars at the other end of its performance spectrum--the M cars with the highest performance engines.
The EU's proposal, which would turn an existing goal into a legally binding target, will have to be backed by the European Parliament and EU governments.
--Steve McGrath in London contributed to this article.
Write to Alessandro Torello at alessandro.torello@dowjones.com
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