Automakers Applaud Technology-Neutral EU Emissions Targets for 2030

The European automotive industry signals it is satisfied with the new greenhouse-gas emissions policy set by the European Union that extends to 2030.

Under the deal forged by the European Council – the EU’s highest policy-making body – industries such as automotive that are not included within the region’s emissions-trading system (ETS) must reduce 2030 GHG emissions 30% compared with 2005 levels.

However, those targets will vary between the 28 EU member states, with richer countries having to cut emissions more than poorer ones. The standards will be set by a formula that reflects the systems already in place for reducing emissions through 2020. A European Council communique released in late October confirms 2030 reduction targets will range from 0% to 40%, depending on the country.

The government body also determined additional efforts are needed to “reduce greenhouse-gas emissions and risks related to fossil-fuel dependency in the transport sector.” As a result, the European Council is being asked to consider new measures “for a comprehensive and technology-neutral approach for the promotion of emissions reduction and energy in transport, for electric transportation and for renewable-energy sources in transport.”

This guidance is being welcomed by ACEA, the European automobile manufacturers’ association, because it refrains from forcing automakers to adopt a specific fuel-saving technology. ACEA says it has “long argued that a technologically neutral approach is the most effective way of ensuring practical carbon-reduction technologies make it to the road, and that all transport modes must contribute equally to achieving the EU’s climate objectives.”

The council’s target is ambitious, the group notes, adding it “appreciates that policy makers have chosen to emphasize cost-effectiveness in achieving its overall target, and stresses the need to balance environmental sustainability with competitiveness.”

“Europe’s cars, vans, trucks and buses currently have the highest environmental standards in the world,” ACEA Secretary General Erik Jonnaert says. “Our industry is committed to contributing its fair share towards lowering greenhouse-gas emissions, namely through more fuel-efficient technology and continuing its investments into more alternative powertrains.”

The council also soothed concerns held by key automotive suppliers with high energy costs, such as steel and aluminum producers, by preserving the free allocation of emission certificates after 2020. Most sectors have to buy emission allowances under the ETS, but because of potential loss of business to rivals in jurisdictions with weaker carbon controls, the EU has agreed steel and aluminum makers will remain eligible for free allowances until 2030.

Still, the EU is targeting the sector for a 40% reduction of greenhouse-gas emissions by 2030, compared with 1990 levels.

Eurofer, the European association of steel producers, notes the deal will pose some challenges.

“The new framework is an extremely challenging target for Europe’s industry in absence of similar constraints for our competitors worldwide,” says Axel Eggert, Eurofer acting director general.

However, he welcomes the decision to retain eligibility for free carbon credits that will allow the EU industry to compete with foreign imports.

“The clear commitment by the heads of state to set safeguard measures at the level of the most efficient installations is a positive signal for industrial investment, growth and jobs in Europe,” Eggert says of the European Council.

Despite all this, the EU’s cap-and-trade ETS will tighten, with the cap lowered 2.2% annually beginning in 2021, rather than the 1.74% rate currently. Moreover, to reach a 40% reduction in greenhouse gases by 2030, the sectors covered by the ETS (which also includes power producers) would have to achieve a 43% reduction in emissions.

This concerns the German Steel Federation. The steel trade group’s president, Hans Jürgen Kerkhoff, says the targets will lead to “prohibitive costs” for the German steel industry amounting to €1.4 billion ($1.8 billion) annually, even if free allocations continue to be awarded by the EU.

“In such a scenario, our industry could not withstand competition with competitors in countries without emissions trading,” he says.

The outgoing president of the European Council, Herman Van Rompuy, contends the decision enables EU industrialists to plan ahead.

“We managed to reach a fair decision. We kept our promise. We offer certainty,” he says.