Subsidiarity: Added value of EU action

Although initiatives at the national, regional and local level can create synergies, alone they will not be sufficient. Lack of coordinated EU action via the strengthening of CO2 emission

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standards would translate into a risk of market fragmentation due to the diversity of national schemes, differing ambition levels and design parameters. On their own, individual Member States would also represent too small a market to achieve the same level of results, therefore, an EU wide approach is needed to drive industry level changes and to create economies of scale.

Market fragmentation would potentially translate to competitive distortions, a risk of tailoring national legislation to suit local industry, and compliance costs (passed on to consumers) for both component suppliers and vehicle manufacturers. It would also weaken the incentive to design fuel efficient vehicles and deploy zero-emission vehicles to the overall EU market.

Coordinated EU action therefore provides benefits for both manufacturers, component suppliers and consumers.

Furthermore, while national, regional or local fiscal incentives play a role to incentivise the market uptake of zero-emission vehicles, they are easily reversible, and therefore they do not provide the needed long-term market signal and predictability. Coordinated EU action through the strengthening of CO2 emission standards could catalyse the transformation of the sector, and it would provide the entire automotive value chain with the necessary long-term, stable market signal and regulatory certainty needed to make the large capital investments that are necessary to deploy zero-emission vehicles on the market.

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4 OBJECTIVES

General policy objective

The general objectives of this initiative are to contribute to achieving climate neutrality by 2050 (i.e. achieve net zero GHG emissions by 2050) and to this end, in line with the 2030 Climate Target Plan, to contribute to reaching at least 55% net greenhouse gas emission reductions by 2030 compared to 1990 This articulation of targets and objectives requires a coherent strengthening of the policy architecture for climate, including the Regulation on CO₂ emission standards for cars and vans.

Specific objectives

1. Contribute to the 2030 at least -55% net GHG emissions target and to the climate neutrality objective by 2050 by reducing CO₂ emissions from cars and vans cost-effectively and thereby supporting Member States in meeting their target under the ESR, in case of a continued ESR scope.;

2. Provide benefits for consumers and citizens from wider deployment of zero-emission vehicles;

3. Stimulate innovation in zero-emission technologies, thus strengthening the technological leadership of the EU automotive value chain and stimulating employment.

The first specific objective concerns the contribution of cars and vans to the increased overall climate ambition for 2030 and 2050. With road transport causing 20% of EU GHG emissions in 2018, improving the CO₂ efficiency of new cars and vans is of key importance.

The majority of industry representatives, public authorities, and other stakeholders responding to the public consultation considered this objective important. More than half of responding citizens saw it as important or somewhat important (more information provided in Annex 2).

Considering that the effect of the CO2 emission standards on the reduction of emissions from the running stock of vehicles is not immediate, and considering the dynamics of the fleet renewal, early action is important to ensure the achievement of the long term objective.

The second specific objective is related, in line with the European Green Deal, to providing benefits to consumers from a wider deployment of zero-emission vehicles. Policy action on CO2 emission standards should aim at incentivizing the market supply of zero-emission vehicles, which provides (i) air quality benefits, in line also with the “zero pollution ambition”

of the European Green Deal and the Commission’s Communication on a Pathway to a Healthy Planet for All⁵², and (ii) reduction of energy consumption, lowering energy bills, in line with the “just transition” objective of the European Green Deal. This aspect is specifically important in a context where policies on fuels could increase the energy prices for consumers and business. Providing benefits for the consumers is also essential to create buy-in for climate-related action.

These benefits for consumers and citizens were highlighted in the responses to the open public consultation on this initiative. Most responding public authorities, citizens and other stakeholders considered air pollution as an important or somewhat important co-benefit.

Furthermore, the majority of all stakeholder categories considered that reducing the total cost

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of ownership is an important objective. The European Consumer Organisation (‘BEUC’, which is an umbrella group for European consumer organisations) rated this objective as highly important.

The third specific objective relates to innovation, technological leadership and employment. This objective is strongly rooted in the European Green Deal as a new growth strategy, which aims at transforming the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy.

This objective was the one most supported by all stakeholder categories among respondents to the public consultation (80% of public authorities, 78% of industry respondents, 72% of other stakeholders and 69% citizens).

The Commission Communication “A New Industrial Strategy for Europe”⁵³ states the need for an industrial policy, fit for the ambitions of today and the realities of tomorrow. At the heart of this is the ability of Europe’s industry to lead the twin transitions and drive its competitiveness. It cannot afford to simply adapt, it must become the accelerator and enabler of change and innovation. The Strategy also highlights that the EU must leverage the impact, the size and the integration of its single market to set global standards. By providing a common regulatory space and scale, the single market is the driver of competitiveness. This is particularly important for the transport sector, where the green transition offers great opportunities for European industry across the value chains to modernise, create high-quality jobs, develop new products and services, and strengthen competitiveness.

While the EU automotive sector has been successful in developing and manufacturing advanced internal combustion engine vehicle technologies and marketing them world-wide, it will need to adapt to the ongoing global transition towards zero- emission mobility and increasingly channel investments in zero emission technologies.

By providing a clear regulatory signal for industry to develop and invest in zero-emission vehicles, the objective is to foster innovation and thereby to maintain the technological leadership of the EU automotive value chain and stimulate employment in these new technologies.

The three specific objectives are all linked to the necessary increasing share of zero-emission vehicles on the EU market which will reduce CO2 emissions from light-duty vehicles, provide benefits to consumers in terms of air quality (especially in urban areas) and energy savings, and strengthen the technological leadership of the EU automotive value chain. Additional co-benefits are expected to be the increased energy efficiency and energy security as the demand for imported oil will decrease.

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5 WHAT ARE THE AVAILABLE POLICY OPTIONS?

This Section describes the options identified to address the problems listed in Section 3 and to achieve the objectives defined in Section 4. It sets out the rationale for their selection and design, taking into account the public consultation, additional stakeholder input as well as internal and external study reports.

The options explored reflect the outcome of the open public consultation and are grouped into the following categories:

(i) CO2 emission targets for cars and vans (levels, timing, modalities);

(ii) specific incentives for zero- and low-emission vehicles (ZLEV);

(iii) a mechanism to take into account the potential contribution of renewable and low-carbon fuels for the purpose of target compliance assessment.