Analyses
11 mar 20

How tough European CO2 emissions targets impact fleets

Extremely strict new emissions regulations for new cars in Europe mean company car choice lists will have to change dramatically if OEMs are to avoid billions of euros in fines.

The new CO2 standards set by the European Union across its 27 member states mean that from 2021 the average emissions across a manufacturer’s sales in the region must be 95g/km CO2 or below.

To put this into context, 95g/km equates to about 57mpg (US) for petrol (gasoline) and 66.5mpg for diesel; and 4.1 litres/100km for petrol and 3.5l/100km for diesel.

Fines for OEMs

For every 1g/km of CO2 above the 95g/km threshold, a manufacturer will be fined €95 multiplied by its volume of new-car registrations in the preceding year.

Autovista has calculated that these stringent emissions targets will cost Europe’s 10 largest carmaker groups almost €17.1 billion in 2021, with Volkswagen Group (VW) the heaviest hit and Toyota the lightest.

Tougher emissions standards from 2025

The CO2 emissions thresholds will tighten further in 2025, when the EU will demand a 15% reduction on OEMs’ 2021 levels, and then again in 2030, by which time the EU wants to see a 37.5% reduction in CO2 compared to 2021 levels.

The scale of the fines has accelerated manufacturer efforts to introduce low and zero emission hybrid and electric models.

CO2 emissions rising

However, average CO2 emissions of new cars in Europe’s major markets of France, Germany, Italy, Spain and the UK are actually rising due to two factors. Firstly, consumers are turning away from diesel engines and towards higher emission petrol - in 2019, 58.9% of all new cars registered in the EU ran on petrol, compared to 56.6% in 2018, while diesel sales fell by 5.4 percentage points to 30.5%. And secondly, new car buyers are favouring SUVs, which are heavier and therefore have higher CO2 emissions than cars.

Surge in electric vehicles

Electric vehicles, whether pure battery, plug-in hybrid or hybrid accounted for only 3.0% of new passenger cars in the EU last year, with many fleets reporting difficulties in sourcing sufficient volumes of low and zero emission cars. However, Transport & Environment, the clean transport campaign group, says the number of electric models available in Europe will more than triple by the end of 2021, up to 214 cars from 60 at the end of 2018, with the prospect of greater choice and supply for company car drivers. With fleets accounting for about half of all new car sales in some EU markets, and 21 of the EU member states having CO2-based car taxes, pressure will mount from both the EU and OEMs for businesses to add low emission vehicles to their company car choice lists.

ICE bans

In addition to the new CO2 targets, a number of major European cities, including Amsterdam, Paris and London have unveiled plans to ban diesel cars or even all internal combustion engine cars within the next few years.

Authored by: Jonathan Manning