- The European Commission this week made a formal proposal to amend the emission performance standards for new cars and vans.
- The proposal covers a flexibility that will give OEMs until 2027 to comply with the current 2025 emissions targets.
- This proposed softening of the rules comes despite EVs recording a year-on-year surge in sales within the European Union. But what will it mean for manufacturers already producing EVs?
Are looser emissions rules coming to the European Union?
Under these proposals, automakers will now need to comply with CO2 emissions targets in a different form. Their compliance with CO2 targets over 2025, 2026, and 2027 will be measured as an average over the three-year period, rather than being a target that needs to be met each year. This means a hypothetical manufacturer could miss the 2025 and 2026 targets without penalty, as long as they comply by 2027. The argument for this from the European Commission is that this will allow some European manufacturers to play catchup against EV competition such as China and the U.S., by avoiding otherwise heavy penalties.
Ursula von der Leyen, President of the European Commission, justified the proposal:
“Our highly innovative automotive industry is decarbonising to contribute to the fight against climate change, but also to maintain its competitive edge on the world markets. With today’s initiative, we grant more flexibility to this key sector, and at the same time we stay the course of our climate goals. Together, we want to prove that decarbonisation and competitiveness can go hand in hand.”
European manufacturers that have previously called for such a flexibility to be introduced include Volkswagen Group and Renault Group. Stellantis is another manufacturer that is set to benefit from these relaxed rules. With OEMs already able to ‘pool’ together to purchase or sell emissions credits from a rival manufacturer, Stellantis announced earlier this week that it will purchase credits from a Tesla-led pool in order to comply with 2025 emissions targets. Now, with this extension likely to take place, it remains to be seen whether these OEMs will use the opportunity to further invest in electrification or to carry on the purchase of emissions credits.
However, not all manufacturers are for these changes – particularly those who have made heavier investments into the EV transition already, while some lobby groups, such as Transport & Environment, have also denounced the proposal. Volvo Cars, who are aiming for 90-100% electrification by 2030, will also be disappointed. Now-former CEO Jim Rowan last month said he was ‘extremely disappointed’ with the plans.
Even so, this extension does not remove the lucrative opportunity for those OEMs who are already well below emissions targets (such as Tesla or Polestar). Polestar, which exclusively sells BEVs, already expects ‘significantly increased revenue contribution’ from the sales of its own CO2 credits – which is expected to stand as a three-digit million-dollar amount per year from 2025.
EU newcomer BYD is also reportedly considering forming a carbon credit pool with European manufacturers to further reap financial benefit from its high proportion of BEV sales – especially crucial when it is facing EU import tariffs.
For this proposal to come into law, it’ll still need to be approved by the European Parliament. Furthermore, the EU still so far remains committed to a 2035 ban on the sale of new combustion engined cars, so this proposal is not a complete get out jail free card for manufacturers struggling to sell the required amount of lower-emission vehicles.
