Tighter European Emissions Standards Could Kill Car Business

Volkswage XL1

While the US government focuses on fuel economy standards to fight climate change, European regulators target carbon dioxide emissions for the same task. But mpg and CO2 are intimately related; the more one goes up the more the other goes down.

The current Euro standard for CO2 emissions – already one of the toughest in the world – will be cut by 25% to 95 grams per kilometer by 2021. That is roughly equivalent to the 54.5 MPG standard the EPA has mandated for cars sold in the US by 2025. But now Euro regulators are proposing to tighten their standard still further, setting it at a mere 65 grams per kilometer – roughly 84 MPG – by 2025.

At a press conference at the Paris Auto Show this week, Volkswagen CEO Martin Winterkorn warned such a move could be “fatal” to the automobile industry. He noted that for every gram of carbon dioxide the target is cut, VW has to invest about 100 million euros – about $140 million – “without knowing when these investments pay off,” reports The Detroit Bureau. He isn’t alone either. Sergio Marchionne, CEO of the recently merged Fiat Chrysler Automobiles, agrees that new emissions standards are “one of the toughest issues we face.”

Using Winterkorn’s math, Volkswagen would need to spend $4.2 billion to meet the 65 g/km standard. While he says it is possible to build engines that comply with the proposed regulation, he fears the cost of doing so will drive many smaller manufacturers out of business. Furthermore, cars that meet that standard will be far more expensive. The Volkswagen XL1 actually exceeds the proposed standards, but sells for an astronomical $170,000.

Industry critics say all this negativity is just smoke, and they point out that automakers predicted government regulations would drive them out of business back in the 1970’s when OPEC embargoes led to the first fuel economy standards. Since then, the internal combustion engine has been made to do things no one ever thought possible. Today’s engines make far more power, go further on a gallon of gasoline, and emit less than 10% as many harmful pollutants as the engines from 40 years ago. Volvo has just unveiled a 2.0 liter four-cylinder engine that cranks out 450 horsepower and meets all current European emission standards.

Politics plays an important role in this as well. The automobile industry is a major part of the European economy, an economy that is faltering as of late. The Continent can ill afford widespread layoffs if production falls because cars are too expensive for most people to afford. At the same time, ocean levels are up to 8-inches higher than they were just 50 years ago thanks to melting icecaps, so clearly “business as usual” is not an option.

As business and governments wrestle over how to address climate change, they need to recognize that the real issue is the fuels we use to power our economies. Carbon dioxide is what results when we burn fossil fuels. No amount of regulation is going to repeal that basic scientific fact. It’s time for the world to move on from fossil fuels, and the sooner the better for us all.

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.