One of the biggest tasks for the automotive industry in 2020 will be determining how to navigate new European Union regulations that greatly reduce the permitted level of CO2 emissions from vehicles. The CO2 emissions of carmakers' fleets must reach a collective average of 95 grams per kilometer, with individual targets depending on the composition of those fleets.
To give an indication of the significance of this shift, PA Consulting determined that based on current purchasing patterns, automakers will face collective fines of about €14.5 billion in 2021 for noncompliance — 2020 has been determined a "phase-in" year during which "super credits" will be awarded for nonpolluting vehicles and 5% of fleets are exempt from calculations.
The situation is further complicated by the patchwork of rules that govern individual regions across the continent. A number of cities in Germany have banned certain older, more polluting classifications of diesel cars from their roads. The U.K. city of Bristol has taken this a step further and proposed to bar the latest Euro 6 diesels, despite criticism from observers who note that many such models are in fact less polluting than the gasoline alternatives that would remain on Bristol's streets.
Add to this the fact that CO2 emissions from vehicles in the EU have in fact risen for the past two years, thanks in no small part to the increasing popularity of larger, more fuel-intensive SUVs, and the mission at hand appears almost herculean. As the next round of quarterly earnings nears, expect carmakers to come under pressure to declare whether they expect to meet these targets and, if not, how costly the shortfall will be.
Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries. Drawing on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence, it is published every Thursday. Click here to subscribe.
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