Cast your mind back to 1994. During this year, BMW officials will stand proudly waving good-bye to the last ever "E30" 3-series model, Peugeot and McLaren will join forces in what will become arguably the most tragic of Formula 1 seasons, and Nelson Mandela will become President of South Africa.
But with little drama, Germany will meet with European environment ministers and boldly propose a recipe for limiting CO2 emissions from cars to a then unbelievably ambitious 120g/km.
Cook for 15 years, while on the way adding a pinch of global surface temperature increase, a slice of fresh, global climate change perception and a large measure of beautifully complex and frustratingly protracted European Union procedure, and you shall find a product of that 1994 recipe.
So, why has this legislation taken such a long time to cook and will it be to everyone's taste?
The History
The German proposal of 120g/km was formally announced by the European Commission in 1995 and, using that year as the baseline, represented a
35% reduction in the European fleet average.
The inception target was to be a full 10 years away (2005), a timeline that today's OEMs can only dream of.
However, just as the discussion was gaining pace, the 1996 environment council turned the heat down by introducing the concept that CO2 legislation should have a target date of 2005 "or 2010 at the latest."
Tantamount to a five year phase-in period, this proved to be a vital piece of wording, as burgeoning compliance costs, such as mandatory catalytic converters, etc., were hard to swallow financially and harder to incorporate into a generally fixed design cycle.
Two years later (1998) and while the recipe and the desire for an end product remained, it was now the carmakers' turn (through the European Automobile Manufacturers' Association (ACEA)) to come forward with a set of two voluntary targets for 2003 and 2008.
After an additional year of political and industrial pontification and postulation, on 5 February 1999, Ms. Ritt Bjerregaard, member of the European Commission, stepped forward resplendent with hope that her announcement would signal a significant step toward the ultimate target of 120g/km, now already five years old.
ACEA members were now to achieve a non-mandatory fleet average of 140g/km by 2008 with an interim target of 165a170 g/km by 2003, now just four years away.
Naturally, there was a key ingredient enforced quite publicly by the EU commission, in that should ACEA fail to meet the 2008 target, then those ACEA members would need to prepare for Europe's first mandatory CO2 legislation for cars: a "threat" and, as we know now, this is exactly what has transpired.
Despite enormous technological effort from OEMs and associated supply chains against a backdrop of increasing safety legislation and aggressive consumer demand for additional vehicle equipment, ACEA members did indeed miss the mark, but by a closer margin than first envisaged with the 2007 European fleet standing at 158g/km.
It was in 2007 that the European Commission moved to acknowledge a status of "missed," subsequently setting about making plans for mandatory legislation, in tune with a wider climate change package being passed through European Parliament.
The EU Commission considered this a slap on the ACEA's wrist, followed by another classically long-winded round of discussions, concessions, high-level political involvement, alternative proposals and a co-decision procedure that culminated in a parliamentary decision on 17 December 2008, perhaps a case of too many cooks spoiling this particularly long meal.
In one final but predictable twist, before becoming a lawful piece of legislation, the parliamentary proposal had to be voted through the European Council. This happened on 6 April 2009, some 14-and-a-half years since the German officials first arrived in Brussels.
The Decision
The end product certainly appears rather different to proposals as recent as one year ago, with changes to fine levels, the inception period
and the introduction of both "Super Credits" and "Eco-Innovation" technologies.
In essence:
European powertrain analyst Florian Eichinger has some interesting observations on OEM performance and technology strategy against this backdrop.
European OEM Performance
Observing short-term fleet improvements between 2006 and 2007 highlights some rather different results across our European OEMs (Chart 1).
German premium manufacturers Daimler and BMW had very impressive performances. Daimler reduced its average CO2 emissions by 3.7% and BMW did the same by a formidable 7.6%. It must be noted, however, that Daimler's success, according to reports, was skewed in 2007 by the removal of Chrysler sales responsibility.
Other OEMs such as Fiat (-2.1%), Ford (-0.6%), Opel (-0.6%), PSA (-0.7%), Renault/Nissan (-0.6%), Toyota (-2.6%) and Volkswagen (-1.8%) had only moderate improvements.
CHART 1
SOURCE: 2006/7 "ACTUALS" - EUROPEAN FEDERATION FOR TRANSPORT
AND ENVIRONMENT
Proximity to Target
In 2012, individual member states shall be tasked with collecting phased-in fine revenues for the deviation of individual CO2 average specific
emissions targets.
Each vehicle manufacturer will need to comply with its individual fleet target, derived through the use of the "limit value curve." This "curve" is a linear function of CO2 value over vehicle mass; thereby individual targets shall depend on the average mass of vehicle fleet for any given OEM. The higher the average mass, the higher the individual CO2 limit.
Currently, PSA is steering the best course. In 2007, an average vehicle from PSA emitted 141g/km, with a limit of 127g/km set for 2012*. This means that PSA has to reduce its average CO2 emissions by a further 9.9% over a five-year period. Its archrival Fiat has to reduce its average emissions by 13.5%*.
Both GM-Opel and Renault/Nissan will need to decrease CO2 averages from 156g/km to 129g/km*, representing a rather more challenging 17.3% improvement. Likewise, both Ford and Volkswagen groups have the five-year period of 2007-2012 in order to achieve a reduction of 18%-19%*.
Although BMW appears to be the "darling" of the pack by significantly reducing its CO2 average between 2006 and 2007, it shall certainly not rest on its laurels. The 2007 BMW fleet still emitted 170g/km, with its individual goal for 2012 set at 137g/km*, a reduction of 19.4%. While CSM remains confident that Daimler shall reach compliance, on paper at least, it is a cause for concern. A reduction of 24.3% across the Daimler fleet in order to reach its 137g/km target is seen by some industry commentators as a large mountain to climb, although technology deployment is imminent, not just at Daimler but across all European OEMs.
Technology Strategies
In Chart 2 we can see the now-well-known clutch of technical strategies likely to be employed in order to reach 2012 compliance. Stop/Start
technology experiences robust growth (+27ppt) followed by gasoline direct injection engines (GDI +17ppt) and as a sign of downsizing,
turbocharged gas engines (+11ppt). The application of dual clutch transmissions (DCTs) also increases (+5ppt), although in contrast, hybrid
technology (mild and full) posts a weaker growth (+2ppt).
It is widely believed that this brace of solutions should prove largely sufficient for the majority of OEMs to reach phased-in compliance from 2012. At CSM, we believe that the real challenge looks set to begin over the period of 2017 to 2023, when marketing exercises could well transpose into far more necessary action, forced by much tougher legislation. Another slow-cooked recipe or time for a microwaved mandate? Only time will tell.
*Assuming average vehicle mass does not increase over 2007 baseline.
Andrew Fulbrook may be reached via email at andrewfulbrook@csmauto.com.
Florian Eichinger may be reached via email at florianeichinger@csmauto.com.
