Global Insight Perspective | |
Significance | Germany and France have agreed a framework for jointly supporting the EU's targets for CO2 emissions of passenger cars which is due to be implemented by 2012 |
Implications | The agreement has been hailed as an important breakthrough by German Chancellor Angela Merkel as it will allow a phased introduction of the regulations that will benefit the German automotive industry, which generally produces higher CO2-emitting cars. |
Outlook | The lack of accord that previously existed between two of the EU's most powerful member states was a stumbling block to finalising the legislation. Now that Germany and France have come to an agreement, shaping the final regulatory structure should move on apace. |
Little Detail But France and Germany Agree to CO2 Limits
German Chancellor Angela Merkel has told Reuters that the German and French government have agreed on a framework for which the European Union's (EU) plans to limit the CO2 emissions of passenger cars can be fairly implemented. Merkel called the agreement an "important breakthrough" and it involves a stepped implementation of the target of 120 g/km for passenger car emissions, which the EU was originally proposing be applied to all passenger cars by 2012. Although few details of the agreement have been announced, Merkel said that there would be a "substantial" phasing-in period for manufactures with a large number of relatively high-emission vehicles such as BMW, Mercedes-Benz and Audi. A system of fines will be implemented to those carmakers that do not meet the targets exactly and this was originally another point of disagreement between France and Germany. However, it appears that the two countries have now also reached agreement on how these fines will be structured and implemented.
Speaking about the discussions between the German and French governments Merkel said, "We're calling for a substantial phasing in period. In 2012 when new cars will have reached 120 grams that does not mean that all the cars have already achieved the 120 gram average. That means we need a phasing-in period for the renewal of the entire product range of the car industry. There were very, very large differences at the start due to the different product range. I'm happy to say that we support the Commission goal of 120 grams per km from 2012. Secondly, we're in favour of there being long-term goals. We've mentioned a framework of 95 to 110 grams per km. We can't say definitively at this point what's feasible from a technical point of view." Merkel actually stated that the agreement between Germany and France actually exceeded the European Commission (EC)'s proposals, although as yet concrete detail is in short supply. She added, "We're going well beyond the Commission's proposal. That's important. There will be a so-called phasing in for fleets. Fleets of cars will be viewed in their entirety. The details of that will be worked out by the environment ministers.
Outlook and Implications
Germany and France have avoided the embarrassment of having their hands forced by the EU come 2012. Given the groundswell of support for environmental legislation, a refusal to back the target was never really an option for either government, although it has always been the German automotive industry that has stood to lose the most as a result of the CO2 limits. At the heart of the disagreement was how to structure the regulatory framework and penalties for Europe's car manufacturers. Angela Merkel's government is keen to defend the interests of the German automotive industry, which tends to build a bigger proportion of powerful, higher polluting vehicles, while the French and Italian industries produce a higher proportion of smaller, less polluting cars. It will therefore be fascinating to see what concessions, if any, Merkel has achieved for the German industry, once the detail of the agreement is announced following a further meeting of the French and German environment ministers. There are still major implications for a company like Porsche which is making huge efforts to reduce the CO2 emissions of its sports cars. Last week it was announced that the revised version of the 911 would have CO2 emissions of 225 g/km, which in itself is a remarkable achievement for a 3.6-litre flat-six gasoline (petrol) engine developing 345bhp. However, this is still nearly twice as much as the EU's flat limit and it remains to be seen whether in the medium and long-term cars that exceed the EU's limit will still be allowed to be sold as long they are counterbalanced by lower-emitting vehicles in the same vehicle group.
EU industry commissioner Günter Verheugen recently confirmed (see Germany: 23 April 2008: VW Takeover Vital for Porsche's Efforts to Meet CO2 Limits, Says EU Commissioner) that Porsche and VW would be treated as one vehicle group once the sports car manufacturer's buy-out of VW is completed, which is scheduled to through in September or October as long as regulatory approval is met. This means that CO2 emissions of the 911 and other Porsche sports cars will be offset by VW's low-emission Bluemotion technology that is currently being rolled out throughout its model range. Perhaps the most significant element to Germany and France agreeing to the EU's proposals is that the framing of the actual legislation should now move on apace. Once this happens Europe's carmakers will know what is expected in terms of their model ranges over the next five years and what the future holds for their higher performance, higher-emitting and higher margin model lines.