Environmental protection regulations
The EU Regulation governing CO2 emissions from passenger cars (443/2009/EC) and the EU Regulation governing light commercial vehicles of up to 3.5 tonnes (510/2011/EU), in effect since April 2009 and June 2011 respectively, set the specific emission limits for all new passenger car and light commercial vehicle models and the fleet targets calculated from the individual vehicle data of brands and groups in the 28 EU member states for the period up to 2019. They are an important component of European climate protection regulations and therefore form the key regulatory framework for product design and marketing by all vehicle manufacturers operating in the European markets.
From 2012 onwards, the average CO2 emissions of European manufacturers’ new passenger car fleets may not exceed the figure of 130 g CO2/km. Compliance with this requirement is being introduced in stages: 75% of the fleet had to meet this requirement in 2013, 80% must meet it in 2014 and the entire fleet in 2015. A further significant reduction in European passenger car fleet emissions to 95 g CO2/km from 2020 onwards has also been resolved.
The EU’s CO2 regulation for light commercial vehicles requires limits to be met from 2014 onwards, with targets being phased in over the period to 2017: the average CO2 emissions of new registrations in Europe may not exceed the figure of 175 g CO2/km, a target required to be met by 70% of the fleet in 2014. The long-term target has also been set, subject to the European Commission’s current review: for the period after 2020, the limit is to be set at 147 g CO2/km. Like the CO2 regulation for passenger cars, the regulation provides for derogations from the targets, for example by offering relief for eco-innovations.
The European Commission intends to set out the CO2 regime for the period after 2020 by the end of 2014. Politicians are already discussing reduction targets for the transport sector for the period to 2050, such as the 60% reduction in greenhouse gas emissions from 1990 levels cited in the EU White Paper on transport published in March 2011. It will only be possible to meet these long-term goals by also making extensive use of nonfossil sources of energy, in particular in the form of renewable electricity.
At the same time, CO2 or fuel consumption regulations are also being developed or introduced outside Europe – in Japan, China, South Korea, India, Brazil, Mexico and Australia, for example. In the USA, a new consumption regulation will impose uniform fuel consumption and greenhouse gas rules in all states of the USA for the period from 2017 to 2025. The law was signed by the US president in mid-2012.
The increase in CO2 and consumption regulations mean that the latest mobility technologies are required in all key markets worldwide. Electrified and pure-play electric drives will also gain more and more ground.
The Volkswagen Group closely coordinates technology and product planning with its brands so as to avoid breaches of emission limits, which would entail severe sanctions. In principle, the EU legislation permits some flexibility. For example:
- Excess emissions and emission shortfalls may be offset between vehicle models
- Emission pools may be formed
- Relief may be provided in the form of credits that are granted for additional eco-innovations contained in the vehicle and that apply outside the test cycle
- Special rules are in place for small series producers and niche manufacturers.
Whether the targets are met, however, depends crucially on the Group’s technological and financial capabilities, which are reflected, among other things, in our drivetrain and fuel strategy.
The other main EU regulations affecting the automotive industry include
- EU Directive 2009/33/EC on the promotion of clean and energy-efficient road transport vehicles (Green Procurement Directive)
- EU Directive 2006/40/ECrelating to emissions from air-conditioning systems in motor vehicles
- Passenger car energy consumption labeling directive 1999/94/EC
- Fuel Quality Directive 2009/30/EC: updates the fuel quality specifications and introduces energy efficiency specifications for fuel production
- Renewable Energy Directive 2009/28/EC: introduces sustainability criteria
- Revised Energy Taxation Directive 2003/96/EC: updates the minimum tax rates for all energy products and power.
The implementation of the above-mentioned directives by the EU member states serves as a flanking measure for the CO2 regulations in Europe. As well as vehicle manufacturers, they are also aimed at other stakeholders such as the mineral oil industry. Vehicle taxes based on CO2 emissions are having a similar effect; many EU member states have already incorporated CO2 elements into their rules on vehicle taxation.
Heavy commercial vehicles put into operation from 2014 onwards are already subject to the stricter emission requirements under the Euro 6 standard in accordance with EU Regulation 595/2009/EC. At the same time as the CO2 legislation for passenger cars and light commercial vehicles, the EU is preparing a further CO2 regulation for heavy commercial vehicles. Setting one overarching limit for these vehicles – like that in place for passenger cars and light commercial vehicles – is extremely complicated because of the wide range of variants (tractor units with different trailers or bodywork). With the support of the European Automobile Manufacturers’ Association (ACEA), the European Commission is currently preparing a simulation-based method that can be used to determine the CO2 emissions of heavy commercial vehicles of over 7.5 tonnes according to their typical use (short- and long-haul trips, service on construction sites, city buses and coaches). This method is expected to be the basis for the European Commission’s concrete regulatory proposals, which are anticipated by the end of 2014 and likely to enter into force in 2017/2018.
Manufacturers of heavy commercial vehicles are urging the adoption of a system for quantifying CO2 figures that is accessible to everyone and that looks at the vehicle as a whole, and not simply at the engine or the tractor, in order to increase transparency and therefore competition in the market.
As part of its efforts to reduce the CO2 emissions of heavy commercial vehicles, the European Commission is also planning to revise the provisions regarding the maximum permissible dimensions of trucks (Directive 1996/53/EC, the Weights and Measures Directive). By relaxing the legal length restrictions, it may be possible to design vehicles in an aerodynamic way without losing any loading space. Air resistance falls in a rounded and streamlined design, cutting fuel consumption. Considering the vehicle as a whole could save up to 25% in fuel through the aerodynamic design of cabs and trailers, as well as additional technical innovations (e.g. low rolling resistance tyres, hybridization).
In the Power Engineering segment, the International Maritime Organization (IMO) has implemented the International Convention for the Prevention of Pollution from Ships (MARPOL), which aims to reduce marine pollution and which is phasing in limits on exhaust emissions from marine engines. Emission limits also apply, for example, under EU directive 1997/68/EC and the US EPA (Environmental Protection Agency) marine regulations. As regards stationary equipment, national rules are in place worldwide and have to be applied locally. On December 18, 2008, the World Bank
Group set limits for gas and diesel engines in its “Environmental, Health, and Safety Guidelines for Thermal Power Plants”, which are binding if individual countries have adopted no or less strict national requirements. In addition, back in 1979, the United Nations adopted the Convention on Long-range Transboundary Air Pollution, setting limits on total emissions as well as nitrogen oxide limits for the signatory states (including all EU states, other countries in Eastern Europe, the USA and Canada). Enhancements to the product portfolio in the Power Engineering segment are focusing on improving the efficiency of the equipment and systems.
In order to be optimally prepared for the third emissions trading period starting in 2013, we calculated and disclosed the required CO2 emissions to be reported for our German plants in accordance with the Datenerhebungsverordnung (DEV 2020 – German Data Collection Regulation). We have submitted the appropriate applications for the allocation of certificates to the Deutsche Emissionshandelsstelle (DEHSt – German Emissions Trading Authority) for all our plants. Our other plants in the European Union were also checked in accordance with the relevant national laws in force at those locations and action was taken to ensure that applications were submitted to the relevant national authorities in good time.
The allocation method for emissions certificates changed fundamentally when the third trading period (2013 –2020) began. As a general rule, all emission allowances for power generators are being sold at auction starting in 2013. For manufacturing industry and certain power generation installations (e.g. combined heat and power installations), a portion of the certificates are allocated free of charge on the basis of benchmarks applicable throughout the EU. The share allocated for free will gradually decrease as the trading period progresses: the remaining quantities of certificates required will have to be bought, and thus paid for, at auction. Furthermore, installation operators can partly fulfill their obligation to hold emission allowances using certificates from climate protection projects (Joint Implementation and Clean Development Mechanism projects).
For certain (sub-) sectors of industry where there is a risk that production will be transferred to countries outside Europe due to the amended provisions governing emissions trading (a phenomenon referred to as “carbon leakage”), a consistent quantity of certificates will be allocated free of charge for the period from 2013 to 2020 on the basis of the pan-EU benchmarks. The automotive industry is not on this list because in the past it did not meet the criteria examined. It is currently unclear whether it will be included in the carbon leakage list when this is updated in the future.
In 2013, the European Commission decided to initially withhold a portion of the certificates to be auctioned and to only release them for auction at a later date during the third trading period (“backloading”). This temporary shortage of certificates during the trading period may cause certificate prices to rise.
As well as the European Union, other countries in which the Volkswagen Group has production sites are also considering introducing an emissions trading system. Seven pilot projects have started in China, for example, although they have not so far affected the Volkswagen Group. The Chinese government plans to expand those pilot projects into a national emissions trading system.