REDUCING NEW CAR CO2 EMISSIONS: WHAT SHOULD SUCCEED THE VOLUNTARY AGREEMENTS

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1 Reducing New Car CO2 Emissions 2/17 Great Minster House 76 Marsham Street London SW1P 4DR REDUCING NEW CAR CO2 EMISSIONS: WHAT SHOULD SUCCEED THE VOLUNTARY AGREEMENTS We are very pleased to respond to this consultation. Reducing emissions from road transport is critical if we are to make the year-on-year carbon reductions that the Prime Minister has acknowledged are necessary to tackle climate change, which we believe is the greatest threat the world faces. As Sir Nicholas Stern s review of the economics of climate change has recently concluded, the economic costs of inaction on climate change are greater than the costs of action and the longer action is delayed, the more expensive it will be. Our starting point is that to make the cuts in transport emissions that are needed, it is absolutely essential to change how and how much people travel, and that we also have to do all we can to use technology to reduce emissions. This is also the conclusion of the Looking Over the Horizon research for the Department for Transport 1. This research also highlights the importance of reducing the average emissions of new cars: the low emissions vehicles policy package developed by the researchers makes the single greatest potential contribution to cutting transport emissions. Reducing fuel use by cars will also reduce the UK s oil dependency. Much of the UK s oil supply comes from politically unstable areas. Reducing reliance on these supplies will help avoid supply shocks and fluctuating prices which cause big problems for UK plc, such as were seen with the fuel protests of 2000 or the recent increases in oil prices arising from troubles in the Middle East. The current voluntary agreement 1 Bartlett School for Planning, University College London and Halcrow Group for the Department for Transport (January 2006) Looking over the horizon Tony Bosworth Senior Campaigner Transport & Climate Change Friends of the Earth 74 Kirkgate Leeds West Yorkshire LS2 7DJ Tel Fax tonyb@foe.co.uk Website Friends of the Earth Limited Registered in London No Registered Office Underwood Street London N1 7JQ Printed on paper made from 100% post-consumer waste

2 Although there has been some progress in reducing emissions over the last 10 years, the European, Japanese and Korean car industries will fall well short of their agreed targets. To meet its target, the car industry will have to improve fuel economy and reduce emissions from their vehicles at unprecedented rate, three to four times that which has been achieved in recent years. We acknowledge that the targets are set at a Europe-wide level, but believe that the UK level is also important: if the UK is to be considered a world-leader in tackling climate change, it should be a leader in reducing emissions from new cars. Unfortunately this is not the case, and the UK has the fourth highest average emissions from new cars in the EU15. According to the SMMT, average emissions from new cars sold in the UK in 2005 were g/km CO2, compared to a starting point in 1997 of g/km CO2 and a target for 2008/09 of 140 g/km. We share the view of the former Secretary of State for Transport, Alistair Darling, when he said that not enough progress is being made and most people would expect car manufacturers right across Europe to make cars cleaner than they are at present 2. The impact of this failure to meet agreed targets is quantified in the Government s 2006 Climate Change Programme. Expectations of emissions reductions from the Voluntary Agreement package, which also includes company car tax and graduated VED, have been cut from 4MtC to 2.3 MtC. Given the scale of the climate change problem, we believe that failure on this scale is simply not good enough. We believe that the Voluntary Agreement has failed because: There are no penalties for failure to comply Rates of progress at the EU level vary hugely between manufacturers, as has recently been reported by the European Federation for Transport and Environment (T&E). Only three of the top 20 car brands (Fiat, Citroen and Peugeot) are on course to meet the 140 g/km target and seven brands (Volkswagen, BMW, Volvo, Audi, Mazda, Nissan and Suzuki) have made less than half of the progress they should have made by 2005 on a steady reduction path 3. Despite this, there have been no penalties on those brands which have failed to meet interim targets an inevitable consequence of a voluntary agreement. The incentives for consumers are too small Despite the VED increases announced by the Chancellor of the Exchequer in the Budget earlier this year, the current system and bandings still offer insufficient incentive for consumers to choose smaller, more fuel-efficient cars: o The 40 rise in the Budget for the least fuel-efficient cars is less than the cost o of one tank of petrol for the cars affected The gaps between bandings are too small. Research for the Department for Transport 4 shows that wider bandings would have a much bigger impact on vehicle choice. Manufacturers are still mainly advertising gas-guzzlers Manufacturers, through their advertising, are creating a market for fuel-inefficient cars. Friends of the Earth analysis of car adverts in national newspapers in September 2005 showed that: o Over half (57.6 %) of all adverts were for cars in the two most polluting categories (then VED bands E and F). o Over a third (35.8 %) were for the biggest gas-guzzlers (then VED band F) 2 Hansard 2 nd May 2006 column T&E (2006) How Clean is Your Car Brand? 4 MORI for the Department for Transport (2003) Assessing the Impact of Graduated Vehicle Excise Duty Quantitative Research

3 o Only 3.1 % were for the cleanest cars (VED bands A and B) We also have concerns about the test-cycle used to assess emissions, which does not measure the energy use of electronic equipment in cars. Air conditioning was a fairly exclusive option in the mid 1990s but is much more standard now, making the real world performance of cars probably even worse than is suggested by official monitoring figures. We understand that manufacturers can fit the most energyefficient tyres and lubricants when they prepare a car for a test-cycle emissions test, but then use standard tyres and oil for the production model. This again leads to the picture painted by official figures probably being rosier than the reality. The future We believe that the UK Government should call on the European Union to aim to double the average fuel efficiency of new cars sold within a decade. A target over such a period will give long-term perspective and certainty for the industry and for emissions. The pace is equivalent to annual 6.5% a year reductions. An interim target should be set to reduce average emissions to no more than 120 g/km CO2 by We believe that the current voluntary agreement should be succeeded by a mandatory agreement. This should: Be expressed in terms of fuel efficiency rather than CO2 emissions This is what car manufacturers must achieve. Further emissions reductions from lower carbon fuels should be in addition to rather than part of meeting the 120 g/km CO2 target. Be transparent Data on the performance of individual manufacturers should be made available annually, so that the public can see what each is achieving. Be legally-binding with sanctions for non-compliance and incentives to go beyond targets Manufacturers who don t meet targets should face penalties for non-compliance and those who go beyond their targets should be rewarded for doing so. At this stage we do not have any comments to make on the different options suggested by the Department. We support the Government exploring the possibility of including surface transport in the European Emissions Trading Scheme. However, this will not happen for many years and, given the urgency of reducing climate change emissions from transport, this must not be seen as an alternative to action in the shorter term. Car manufacturers will probably object to tough mandatory standards being placed on them and complain about the costs of compliance recent comments from Ivan Hodac, Secretary-General of ACEA that "we cannot keep silent while the commissioner bashes the industry" 5 provide a good example. However, in the US, car manufacturers have a long track record of over-estimating the cost of compliance with proposed air pollution emission standards. A recent report from the US Natural Resources Defence Council concluded that there is a clear historical pattern of automakers overestimating the cost of compliance with proposed air pollution emission standards, and often regulators overestimating the cost, albeit to a much 5 Carmakers call for emissions target to be eased Financial Times 6 th November 2006

4 lesser extent. According to a study done for Northeast air regulators (NESCAUM) pre-regulatory estimates, particularly those on the high-end, can usually be considered to reflect worst case scenarios and do not necessarily form a reliable basis for policy decisions 6. The UK Government must ensure that estimates of the cost of compliance with new regulations are realistic, and that judgements on future action take into account not only the costs of action, but also of inaction. Finally we want to make it absolutely clear that we in no way regard action to improve the fuel efficiency of new cars as being a substitute for action to change travel behaviour: we need both. If transport is to play its full role in reducing the UK s climate change emissions, then traffic levels must be reduced. Standards to force manufacturers to build and sell greener cars, and greater incentives for drivers to buy and use these vehicles are absolutely essential, and the UK Government must do all it can to ensure that tough action is taken at the European level, but this on its own will not be enough. We would be happy to provide further information on any of the points above. Yours sincerely Tony Bosworth Senior Campaigner, Transport & Climate Friends of the Earth On behalf of: Blake Ludwig Campaign Manager Alliance Against Urban 4x4s Stephen Hale Director Green Alliance Charlie Kronick Campaign Manager Climate & Energy team Greenpeace Melanie Edmunds Energy & Transport Policy Officer Royal Society for the Protection of Birds John Grimshaw MBE Chief Executive Sustrans Jason Torrance 6 Hwang R & Peak M (April 2006) Innovation and Regulation in the Automobile Sector Lessons Learned and Implications for California s CO2 standards

5 Campaigns Director Transport 2000