Transcript Slide 1

LowCVP Conference: Policy Challenge
Options for Carbon Regulation of the
European Car Industry
Alex Veitch
Transport Strategy Manager
Energy Saving Trust
The case for regulation
• Long-term carbon regulation for the
car industry is required
• Individual companies should be
regulated, rather than associations
• Flexibility can be built-in to the
regulation
• Emissions trading should be viewed
with caution
Voluntary agreement progress
ACEA
JAMA
KAMA
Target
210
200
190
T&E
figure
180
170
160
150
140
130
1995
1996
1997
1998
1999
2000
2001
2002
Source: EC Monitoring Report 2005, T&E 2006
Target year is 2008 for ACEA; 2009 for JAMA & KAMA
2003
2004
2005
Structural issues
• Association approach is flawed
• Free riders
• No control over members’ production and
marketing strategies
• Companies could leave the association
• Lack of transparency: No official reporting of
EU wide company average
The case for regulation
• A popular step: 70% of people support mpg
regulation*
• Industry certainty: Long-term regulatory
framework to drive innovation
• Global competitiveness: Stay ahead of
regulation in China, Japan, US
* 70% agreed with the statement: “Car makers should be legally required to make cars
that get high MPG (miles-per-gallon)” Mori for EST 2005, Base 1,001
Target: Model Range or Sales
Weighted?
• Model range
– Simpler for manufacturers to administer
– Risks tokenism - low-numbers of low-carbon
cars actually sold
• Sales weighted average
– Drives marketing toward low-carbon models
– Sales weighted is already lower than modelrange, so better deal for manufacturers
Average CO2 emissions: Best selling car
companies in the UK 2005
325
300
275
Sales-Weighted
UK Average (all cars sold)
Model Range
250
225
200
175
150
125
100
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Source: EST analysis of SMMT data
Regulation option: Max CO2 limit
• Outlaws inefficient products
– Transforms the market
– Has worked for white goods
• However…
– Small “tail” of high CO2 cars
– No flexibility for niche producers
Car sales in the UK: CO2 distribution
25%
1997
2000
2005
15%
10%
5%
Source: SMMT
0
30
0
28
0
26
0
24
0
22
0
20
0
18
0
16
0
14
0
12
de
r
10
0
0%
un
Market Share
20%
Regulation option: Company Average
• Similar to U.S. CAFE standards
– Simple structure, companies have ownership
– Uniform target is tough for niche producers
• Refinements for provide flexibility
– Percentage reduction target
– Company target based on its model range
Internal trading
• Provides some flexibility
– Enables high CO2 producers to purchase credits
from low CO2 producers rather than alter their
model range
• However, limited market
– Could be a small number of companies earning
credits
– Risk of “hamstering” – could require a regulator
to intervene
External Trading
• Requires analysis of actual carbon
emissions rather than a fleet-average
figure
• This changes the calculation of the
impact that each company has on the
climate
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Sales weighted average CO2 (g/km)
300
Average
Total Company Emissions
250
10
200
8
150
6
100
4
50
2
0
0
Source: SMMT data, with assumed vehicle lifetime of 200,000km .
Million tonnes CO2
Average vs. Total Company Emissions
12
External Trading
• Flexibility: In addition to making lower
carbon cars, manufacturers could:
–
–
–
–
Reduce sales
Influence driving behaviour
Influence purchase decisions
Buy credits on the market
• Problems
– Quantifying carbon savings from advice activities
Conclusions
• Strong case for carbon regulation of the car
industry, placed on individual companies
• Targets and structure of regulation
– Sales weighted target better than model range
– Percentage target could provide flexibility
• Caution on emissions trading
– Internal trading - insufficient flexibility
– External trading - difficult to quantify savings
from advice activities
LowCVP Conference: Policy Challenge
Options for Carbon Regulation of the
European Car Industry
Alex Veitch
Transport Strategy Manager
Energy Saving Trust