Interaction between CO 2 emission standards for cars and vans and other policies to deliver increased climate ambition in the road transport sector

The policy measures to deliver on the increased climate ambition interact in many ways, and should be seen in combination.

As displayed in Figure 1, the CO2 emission standards for new cars and vans addressed by this impact assessment interact with several other EU legislative instruments and policies. Many of these policies are also revised as part of the ‘Fit for 55 Package’.

Figure 1: Policy context and overview of interactions

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The interactions can be summarized along the following lines:

 Overall climate policy: this concerns in particular the Effort Sharing Regulation (ESR)¹⁵ which sets binding greenhouse gas emission reduction targets per Member State. The current ESR covers emissions of road transport and the CO2 emission standards for vehicles help Member States meeting their ESR targets. Under the Energy and Climate Governance Regulation, Member States have to adopt National Climate and Energy Plans which, inter alia, cover the policies and measures aiming at reducing emissions from light-duty vehicles.

 The EU ETS caps emissions from the sectors within its scope, including power generation, and therefore ensures (i) that the additional electricity consumption from the zero-emission vehicles does not lead to additional upstream emissions, and (ii) that the electricity used in zero-emission vehicles is decarbonised over time. Depending on the carbon price, the EU ETS can impact the operating cost for zero-emission vehicles.

Emissions trading for building and road transport would further internalise climate externalities and provide incentives for consumers to reduce emissions. Therefore it can be a complementary demand-side action to the CO2 emission standards.

 Energy and fuels policy: the Renewable Energy Directive as well as the Fuel Quality Directive set obligations on the supply of liquid renewable transport fuels and on the reduction of the GHG emission intensity of liquid transport fuels. The CO₂ emission standards for cars and vans ensure the increased supply and affordability on the market of new efficient and zero-emission vehicles, and therefore they are the key policy-driver for the transition towards zero-emission mobility in road transport. Fuels related legislation provides an additional contribution by incentivising the use of renewable and low carbon fuels in existing vehicle fleets that are not zero-emission. As zero emission vehicles, in particular battery electric vehicles, provide significant energy efficiency gains compared to fossil fuelled cars, the CO2 emission standards also contribute to achieving the targets set in the Energy Efficiency Directive (EED) and wider benefits of the Energy System

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Integration Strategy which will help to maximize the use of renewable electricity and keep energy system costs down. The uptake of zero-emission vehicles will contribute to accelerating the electrification of energy demand and, through smart charging, can also contribute to balancing the electricity grid. The EED is an enabler of achieving reductions of GHG emissions including in transport by providing a framework for stimulating the uptake of specific transport policies such modal shift and urban mobility planning. The Governance Regulation requires to implement energy efficiency measures first, whenever cost-effective.

 Infrastructure policy: the Alternative Fuels Infrastructure Directive (AFID), the TEN-T Regulation, as well as the Energy Performance of Buildings Directive incentivise the rollout of recharging and refuelling infrastructure and thus contribute to facilitating the uptake of zero-emission vehicles. The European Green Deal has at this stage set the indicative target of 1 million public recharging and refuelling points by 2025 and 3 million by 2030. The Impact Assessment for the AFID will provide an analysis on the numbers and types of recharging and refuelling points that are needed.

 Other pricing policies: the Eurovignette Directive and the Energy Taxation Directive may support the decarbonisation of road transport by contributing to the internalisation of the climate externality. The revised Eurovignette Directive will most likely include the option for Member States to vary road charges based on the environmental performance, including the CO2 emissions of light-duty vehicles.

 Policies addressing demand: The Clean Vehicles Directive promotes clean mobility solutions and supports the demand for zero- and low-emission vehicles through public procurement. The Car Labelling Directive requires EU countries to ensure that information on emissions is provided to consumers.

 Other environmental policies: air pollutant emission standards ensure the placing on the market of clean internal combustion engine vehicles with respect to NOx, particles and other pollutants. The European Green Deal roadmap includes a proposal for more stringent air pollutant emissions standards for combustion engine vehicles by 2021 (Euro 7). While the CO2 emission standards incentivise the market deployment of zero-emission technologies, the Euro 7 standards will aim at further reducing the pollutant emissions from internal combustion engine vehicles, which will still be used until nearly all cars and vans on the road will be zero-emission. Most pollutants covered by Euro 7 are also regulated under the National Emission reduction Commitments Directive (NECD), which requires Member States to reduce their emissions of main air pollutants for the periods 2020-29 and more drastically after 2030. The European Green Deal also commits the Commission to a revision of ambient air quality legislation, notably to align air quality standards more closely with the World Health Organization recommendations.

Furthermore, the proposed Batteries Regulation¹⁶ addresses the sustainability of batteries and sets requirements for the collection, treatment and recycling of waste batteries. It will also help addressing the issue of availability of raw materials for batteries, such as lithium, cobalt, and natural graphite, which are critical raw materials (see Annex 7 for details).

 The budgetary framework with the Multiannual Financial Framework and the Next Generation EU, including funding instruments for infrastructure investments (Connecting Europe Facility, Cohesion and Structural Funds, InvestEU, blending with EIB instruments), for the demonstration of innovative low-carbon technologies (Innovation

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Fund) and for research and development (Horizon Europe, Battery Alliance) are also important components of the enabling framework for clean vehicles and technologies.

In light of the above, the revision of CO2 standards for cars and vans needs to be viewed in the broader policy context of the planned revision of all the key legislation for delivering the

‘fit for 55% package’.

The interactions between this impact assessment and the impact assessments supporting the revision of the EU ETS, the Renewable Energy Directive, the Effort Sharing Regulation, the Energy Efficiency Directive, the Alternative Fuels Infrastructure Directive and the Energy Taxation Directive are most relevant in this context. This impact assessment is therefore building on the analytical work of the Climate Target Plan, which takes into account the interaction and combination of the various policies.

The interactions are further explored and assessed in the next sections.