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The Cost of Abiding CO2 Emission Regulations in Europe Will Be Sky High

Every time we see a manufacturer introduce a 1-liter or a new 3-cylinder plant on the market, we hear the same old excuse: we have to do it, we’re forced in this direction. In this regard, the EU regulations are the most stringent in the world. The block made out of 28 countries is now the world leader in fuel efficiency because of the demanding goals set by its governing bodies.
Green car 1 photo
Photo: http://interplextransportation.com
That will, in turn, force the European car makers to adopt new and more complicated solutions to driving down the CO2 emissions of their new cars.

Up until now, the targets were achieved and easily so in some cases. For example, a goal was previously set for 2015 that all manufacturers in Europe must cut CO2 emissions by 28 percent to a fleet average of 130 grams per km. Not only did the auto industry achieve that but it did so back in 2013. Now, they are facing an even bigger challenge.

By 2021, the average must go down to 95 grams per kilometer and that is incredibly hard to achieve considering the methods and technology at the manufacturers’ disposal. Up until now, the targets were so easily achieved because the solutions were easy to implement.

Start/stop features, cylinder deactivation and some revival of the aerodynamics were all it took. Now, to drop below the 100 grams barrier, they will have to introduce more and more plug-in hybrids, electric motors and use even lighter materials that are more expensive to make.

How much will all that cost?

There’s a heated debate going on at the moment between the car makers and environmentalists in Europe. The former claim that the costs for going under 100 grams will be around €8.5 billion for the EU-based companies alone.

To be even more precise about it, Evercore ISI analysts provided even more insight for Automotive News in an interview:

“Recent conversations with manufacturers suggest the cost to reduce CO2 emissions has increased from 30 euros to 40 euros per gram as engineers chase diminishing returns.”

That means, dropping from 127 grams to 95 grams will cost each car maker €1,280 per car. Of course, it all depends on each manufacturer and the technology it uses today but this is basically the average. That’s more than what the EU estimated when introducing the bill, claiming that the effort will be under €1,000/automobile.

Now bear in mind that BMW sold over 2 million cars last year. Some simple math will tell you that they will take a hit of over €2 billion. Let's not even think of the Volkswagen Group that sold over 10 million units last year.

In light of these numbers, most groups are starting to launch hybrids and electric cars by the tens. Volkswagen for example, the biggest car maker in the EU, promised 20 such models by 2018 and other, more traditional companies like BMW are also joining in.

However, as important as these efforts are, one can’t help but wonder who will buy all these new cars and what happens with the old ones? How will they be taken off the roads and how will people be persuaded to no longer use them?

The answer, at least for the EU, is another legislative strong-arm strategy. The Commission (which is the executive power) has plans to drop the target for 2021 to 75 grams per kilometer. In doing so, they will be offering incentives to the 28 member states to help citizens of the EU leave their older cars behind and buy a new one, in turn pushing the industry forward.
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