Strict new carbon dioxide emissions targets will be phased in next year across the EU, with the threat of punitive fines for those who fail to comply. Under the rules, carmakers must cut their average fleet emissions to less than 95 grammes of CO2 per kilometre by 2021. They face a €95 fine for every gramme of CO2 that exceeds the target  multiplied by the number of cars sold that year. There is a potential €30bn penalty for the industry.

It will cost the industry €15.5bn just to make its vehicles compliant. The 95g/km target becomes valid next year for 95 per cent of a car brand’s sales. The phase-in period is meant to give carmakers some leeway as they come to grips with the new rules. Many manufacturers are relying on “supercredits” from electric cars that offset more polluting vehicles, which partly explains the deluge of battery models arriving on the market in the coming 18 months, even though sales of electric cars account for less than 1 per cent of the market. But battery costs mean many of these cars have thinner margins than traditional vehicles. Some are even lossmaking.

It is estimated by UBS that total European car earnings for 2021 will be €7.4bn lower because of the cost to meet targets. This is a cut of about 14 per cent versus 2018. For some carmakers, the hit to profits could be considerable. To comply, PSA, which is the furthest behind, faces a 25 per cent reduction to earnings per share in 2021, it forecasted. Profits at others will face a hit, with UBS forecasting a 13 per cent drop at VW, 10 per cent at Renault, 9 per cent at Daimler and 7 per cent at BMW. VW, which sold 4.4m vehicles in Europe last year, has average emissions of 123g/km, “a huge gap, which is very hard to close. Yet not all of the carmakers are in a state of crisis over the targets. Toyota, which embraced hybrid power more than a decade ago, expects that half of all cars sold in Europe this year will contain the technology. It has raised a previous 2021 target for hybrid sales from 50 per cent to 60 per cent.

Penalties for missing the target are not only steep, but the reputational damage could translate into lost sales as more businesses adopt their own CO2 targets, as businesses that lease vehicles may switch to an alternative supplier. Paying fines rather than investing in technology is also a poor strategy given that after 2021, it gets tougher. By 2030, the EU is targeting car emissions to fall another 37.5 per cent.


Cars are responsible for around 12% of total EU emissions of carbon dioxide (CO2), the main greenhouse gas.

On 17 April 2019, the European Parliament and the Council adopted Regulation (EU) 2019/631 setting CO2 emission performance standards for new passenger cars and for new light commercial vehicles (vans) in the EU for the period after 2020. The new Regulation will start applying on 1 January 2020.

From 2021, phased in from 2020, the EU fleet-wide average emission target for new cars will be 95 g CO2/km. This emission level corresponds to a fuel consumption of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel.

The binding emission targets for manufacturers are set according to the average mass of their vehicles, using a limit value curve. This means that manufacturers of heavier cars are allowed higher emissions than manufacturers of lighter cars. The curve is set in such a way that the targets for the EU fleet-wide average emissions are achieved.

A phase-in period will also apply to the target of 95 g/km. In 2020, the emission targets will apply for each manufacturer’s 95% least emitting new cars. From 2021on, the average emissions of all newly registered cars of a manufacturer will have to be below the target.

If the average CO2 emissions of a manufacturer's fleet exceed its target in a given year, the manufacturer has to pay an excess emissions premium for each car registered.

From 2019 on, the penalty will be €95 for each g/km of target exceedance.

To encourage eco-innovation, manufacturers can be granted emission credits for vehicles equipped with innovative technologies for which it is not possible to demonstrate the CO2-reducing effects during the test procedure used for vehicle type approval. Such emission savings have to be demonstrated based on independently verified data. The maximum emission credits for these eco-innovations per manufacturer are 7 g/km per year.

Manufacturers are given additional incentives to put on the market zero- and low-emission cars emitting less than 50 g/km through a “super-credits” system. This will apply for the period 2020-2022. For the purpose of calculating a manufacturer’s average emissions, such cars will then be counted as: 2 vehicles in 2020, 1.67 vehicles in 2021, 1.33 vehicles in 2022. A cap on the contribution of super-credits to the target is set at 7.5 g/km per manufacturer over the three years.

Manufacturers can group together and act jointly to meet their emissions target. In forming such a pool, manufacturers must respect the rules of competition law.

Manufacturers responsible for fewer than 300 000 new passenger cars registered in the EU in a given year may benefit from exemptions or derogations

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