EU proposes to ease carbon reduction pressure on carmakers. (Photo: iStock)
The European Union continues to loosen its climate action regulations for businesses. European Commission President Ursula von der Leyen announced that this month, the Commission will propose amendments to the carbon emission reduction rules for European car manufacturers.
The proposal seeks an additional two-year compliance grace period, giving manufacturers more time to adjust and avoid hefty fines.
EU plans to ease emission rules after carmakers’ lobbying
On March 3, the European Commission held the second meeting of the "Strategic Dialogue on the Future of the European Automotive Industry." After the meeting, von der Leyen spoke to the press, noting that the discussions focused on three key topics: innovation in the automotive industry, the transition to clean mobility, and competitiveness.
Regarding clean mobility, the discussions centered on manufacturers' carbon emission targets and penalties. Von der Leyen emphasized that the key to the regulatory adjustments was finding a balance: providing predictability and a fair environment for first movers, while also considering the situation of other stakeholders who are asking for more pragmatism and technically neutral solutions in challenging times.
Under the current regulations, European car manufacturers are required to reduce carbon emissions by 15% by 2025 compared to a 2021 baseline. If they fail to meet this target, they will face fines—€95 (about 99 USD) for every gram of CO2 emitted above the limit per kilometer per non-compliant vehicle. The total fines across the industry could reach up to €15 billion (about 15.7 billion USD).
The European Commission is expected to propose a revision that delays the carbon emission rules that were originally set to be enforced this year. The new proposal includes extending the period for calculating carbon emissions beyond the original one-year target, instead using the average from 2025 to 2027. As a result, the enforcement of fines will also be delayed. Von der Leyen emphasized that this change will give manufacturers more breathing room, but the overall carbon reduction target remains unchanged.
Von der Leyen revealed that a proposal will be made to amend the emission reduction regulations for European car manufacturers, granting an additional two-year compliance grace period. (Image: Ursula Von der Leyen)
EU’s relaxed emission rules spark competitiveness debate
In response, environmental advocacy group Transport & Environment's executive director William Todts believes that the proposed amendments will harm the competitiveness of European car manufacturers and cause them to fall behind China. "The key to competitiveness is to be able to produce electric vehicles at a price mass consumers want them. That's what the Chinese have done," Todts said.
Due to a sluggish electric vehicle market, European automakers have been lobbying the EU to adjust its regulations. Some manufacturers are planning to form alliances to pool their carbon emissions, such as Toyota, Ford, and Stellantis, who intend to partner with Tesla, while Mercedes-Benz plans to collaborate with Volvo and Polestar.
UBS Group analysts believe that Volvo, which has already been highly compliant with EU regulations, could generate as much as €300 million (about 315 million USD) in additional revenue from such alliances. However, whether the loosening of EU regulations will affect the carmakers' plans to form alliances remains to be seen.
