Is Europe on track towards net zero mobility?

Type de publication:

Conference Paper

Source:

Gerpisa colloquium, Bordeaux (2024)

Résumé:

In February 2022 the European Union took the ground-breaking decision to ban the sale of Internal Combustion Engine Vehicles (ICEVs), including plug-in hybrids (PHEVs), from 2035 via the ‘Fit for 55’ update of the CO2 regulation for cars and vans. ‘Fit for 55’ stands for the need to reduce CO2 emissions in Europe by at least 55% by 2030 compared to 1990 in order to keep the 100% reduction target for 2050 on track. Carbon neutrality by 2050 is the condition for fulfilling the Paris Agreement and keeping global warming below a rise of 2°C.

This paper seeks to explore whether the ‘Fit for 55’ update of the CO2 regulation is up to the task of fixing its past mistakes and putting Europe on course to reach net zero mobility by 2050, while also dealing with the new set of challenges that arises with the accelerated process of electrification.

Three challenges will be the focus of attention.
First, the banning of ICEVs in 2035 will have, as a direct consequence, the almost complete phasing out in slightly more than ten years of a core European industrial sector specialised in the manufacturing of conventional powertrains and transmissions that currently accounts for 30-40% of the 2.4 million workers directly employed in automotive manufacturing. Even in the most optimistic scenario of a complete production in Europe of the batteries and electric powertrains needed for 100% electric vehicle (EV) sales
in 2035, the net loss of employment in the automotive sector will still amount to several hundred thousand jobs, highly concentrated in a few regions and countries (STRATEGY& 2021).

Second, EVs are currently much more expensive than ICEVs with an average gap of 10,000-15,000 euros for similar models. When we compare the price of the average EV with that of the average ICEV actually sold in Europe in 2022, the gap becomes even bigger, at more than 30,000 euros (Bibra et al. 2022), because most of the EVs currently being sold are priced in the high range. This gap raises the crucial problem of affordability that was highlighted in the European Commission’s impact study for the ‘Fit for 55’ update as the main hurdle towards 100% sales of EVs (European Commission 2021).

Third, with the internal combustion powertrain, the European automotive industry benefited from a technical and regulatory protectionism. The combined effect of the most demanding technical regulation for homologating vehicles and the most demanding CO2 standards for the sale of new cars meant that only very specific powertrains manufactured in Europe, and in particular diesel powertrains, would satisfy these norms. Foreign OEMs had either to buy these powertrains from European OEMs and suppliers, or develop and manufacture them in Europe with European suppliers. Both solutions have limited the direct imports of cars and, more generally, the capacity of foreign OEMs to capture market share.
With battery electric vehicles (BEVs), this scenario is inverted: pure electric OEMs in the US (Tesla) and the New Energy Vehicle manufacturers in China (BYD, SAIC, Geely, Chery, Dongfeng, etc.) enjoy a competitive advantage over European OEMs and do not face constraints in importing and/or producing cars in Europe. Since the beginning of the accelerated electrification of European sales in 2020, their market share has doubled every year and will soon become a significant threat to the survival of European OEMs.

To discuss how the ‘Fit for 55’ update addresses past regulatory failures and deals with this new set of challenges, the paper is organised as follows.

The first section traces the genealogy of the ‘Fit for 55’ update, highlighting a key component missing from its design: the abandonment of the weight- based CO2 standards that have largely contributed to making European cars heavier, more powerful and more expensive in the last twenty years, when the need to reduce CO2 emissions should have required the opposite (Pardi 2021, 2022).

The second section summarises the past and present implications of this regulatory ‘upmarket drift’, focusing on three in particular: environmental – the failure to reduce CO2 emissions; economic – the distortion of competition between generalist and premium OEMs that has favoured the manufacturers of the heaviest and most polluting cars; and social – the increasing exclusion of the middle and working classes, in particular in southern European countries and central and eastern ones, from access to new cars and the most up-to-date models.

The third section analyses the combined consequences of this pre-existing upmarket drift and the fast-accelerated process of electrification triggered by ‘Fit for 55’, especially concerning these three implications raised by the electrification of the European automotive industry. It shows that upmarket drift risks compromising the purpose of electrification, creating barriers to its diffusion, amplifying its negative economic and social outcomes and reducing its environmental benefits.

The conclusion suggests some urgent policy measures to address these risks and avoid the reproduction of past failures and mistakes.

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Concéption Tommaso Pardi
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