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7
Working Paper 2024.07
Is Europe on track
towards net zero
mobility?
Tommaso Pardi
Is Europe on track
towards net zero
mobility?
Tommaso Pardi
7
Working Paper 2024.07
european trade union institute
Tommaso Pardi is the director of Gerpisa, ENS Paris-Saclay, CNRS.
Cite this working paper: Pardi T. (2024) Is Europe on track towards net zero mobility?
Working Paper 2024.07, ETUI.
Brussels, 2024
©Publisher: ETUI aisbl, Brussels
All rights reserved
Print: ETUI Printshop, Brussels
D/2024/10. 574/12
ISSN: 1994-4446 (print version)
ISSN: 1994-4454 (electronic version)
The ETUI is co-funded by the European Union. Views and opinions expressed are however those
of the author(s) only and do not necessarily reflect those of the European Union or the ETUI.
Neither the European Union nor the ETUI can be held responsible for them.
3WP 2024. 07
Contents
Abstract ........................................................................................................................................................ 4
Introduction ............................................................................................................................................... 5
1. The ‘Fit for 55’ ban on ICEVs: from the Dieselgate scandal to
the pro-electric coalition ................................................................................................ 8
2. Upmarket dri: regulatory causes and socioeconomic consequences ............. 11
2.1 The environmental, social and economic consequences of regulatory
upmarket dri .............................................................................................................................. 12
3. When electrification meets upmarket dri ............................................................ 16
3.1 Environmental consequences: weight matters also for EVs ....................................... 17
3.2 Social consequences: a growing divide between rich and poor countries
and households .......................................................................................................................... 21
3.3 Economic consequences: fast growing imports and declining market shares
for generalist carmakers ......................................................................................................... 26
Conclusions ................................................................................................................................ 30
References ................................................................................................................................... 35
Annex ........................................................................................................................................... 38
4WP 2024. 07
Abstract
The purpose of this paper is to explore whether the ‘Fit for 55’ update of the
European Union’s CO₂ regulation is up to the task of xing 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 electrication.
The pa p e r ’s analysis indicates that it is not up to su c h a ta s k . Th e r e is an urgen t
need to rectify the ‘Fit for 55’ update, and, more generally, the trajectory
taken by the electrication path in Europe. There are, however, a few, key
and relatively straightforward measures that could steer the production and
sale of new cars in Europe towards a more sustainable, inclusive and ecient
path. These include the phasing-out of the weight-based standards regime
and its replacement with one geared rather better to energy eciency; and
to integrate lifecycle analysis into the regulatory regime so as to ensure that
a car’s full carbon footprint is taken properly into account. These measures
together should steer the production and sales of new cars in Europe in the
right direction: towards greener, more energy ecient, aordable, electric
cars that are made in Europe. The paper concludes that systems of support
need to be fundamentally recongured if electromobility systems are to be
shaped more in the direction of aordability.
Is Europe on track towards net zero mobility?
5WP 2024. 07
Introduction
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 fullling the Paris Agreement and keeping global
warming below a rise of 2°C.
Transport is the only sector in Europe whose emissions have increased since
1990 rather than decreased. Fuel consumption by cars represents 57% of the
CO₂ emitted in 2021 by the transport sector and CO₂ emissions from cars
have increased by more than one-fth since 1990. This is why the ‘Fit for 55’
package has been particularly demanding for the automotive sector. It is not
a matter of keeping the sector on the right path towards decarbonisation, as
is the case for the other main emitting sectors. For road transport emissions,
a radical course correction is necessary to address the cumulative failures of
both EU regulators and carmakers to bring down CO₂ emissions during the
past thirty years.
This paper se ek s to ex p lore whether the ‘F i t for 55’ update of the CO ₂ re g ulation
is up to the ta s k of x in g it s pa st mi st ak e s an d pu t ti ng Eu r op e on co u r se to re a c h
net zero mobility by 2050, while also dealing with the new set of challenges
that arises with the accelerated process of electrication. The point is not to
question the necessity of the fast-track electrication of individual mobility,
and neither does the paper argue for a longer time-span for the combustion
engine or see synthetic fuels as a viable alternative. It does, however, argue
that, without policy changes, the current pathway towards electromobility is
not sustainable and will not deliver the decarbonisation targets.
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 power t rain s nee ded for 100% elec t ric vehicle (EV ) sale s
Tommaso Pardi
6WP 2024. 07
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
ga p of 10,000-15 ,000 eu r o s for si m i l a r model s. When we compa r e th e price of
the average EV with that of the average ICE V act ual ly 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.
Th i s gap raise s th e cr ucia l pr oblem of aordab ility that wa s 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). The risk
is also one of generating increasingly unequal access to individual mobility
since only a small minority of wealthy households, mainly in northern
Europe, has access to these vehicles so far, even as second-hand cars.
Third, with the internal combustion powertrain, the European automotive
industry beneted from a technical and regulatory protectionism. The
combined ee c t of the mo st dem a n d i ng tec h n i c al re g ul a t i o n fo r homologati ng
vehicles1 and the most demanding CO₂ standards for the sale of new cars
meant that only very specic 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 electrication of
European sales in 2020, their market share has doubled every year and will
soon become a signicant 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 rst 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).
1. This is the process by which vehicles sold in Europe (including imported ones) must be
approved for sale according to a list of mandatory environmental, safety and security
standards that concern the dimensions, the functions and the performances of the vehicles
(see also: https://www.acea.auto/fact/type-approval/).
Is Europe on track towards net zero mobility?
7WP 2024. 07
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 electrication triggered
by ‘Fit for 55’, especially concerning these three implications raised by the
electrication of the European automotive industry. It shows that upmarket
drift risks compromising the purpose of electrication, creating barriers
to its diusion, amplifying its negative economic and social outcomes and
reducing its environmental benets.
The conclusion suggests some urgent policy measures to address these risks
and avoid the reproduction of past failures and mistakes.
Tommaso Pardi
8WP 2024. 07
1. The ‘Fit for 55’ ban on ICEVs: from the
Dieselgate scandal to the pro-electric
coalition
The genealogy of the ‘Fit for 55’ update to the CO₂ regulation proposed by
the Commission in March 2021 and adopted by the Council in March 2023
can be traced back to the Dieselgate scandal that erupted seven years earlier.
In September 2015, Volkswagen was found guilty by the US Environmental
Protection Agency of having used a cheating device for homologating its
new diesel models for the US market. It soon became evident that this
was not an isolated case: all carmakers were using more or less legal and
illegal devices to ‘optimise’ the emissions of air pollutants and CO₂ during
homologation tests. The International Council on Clean Transportation
(ICCT), the non-governmental organisation (NGO) which had uncovered
the cheating device, found that EURO 6 diesel cars homologated in Europe
between 2011 and 2015 emitted, in real drive conditions, on average ve
times more air pollutants (NOX) and 30% more CO₂ than in homologation
test s (Bald ino et al. 2017). The ICCT als o found that the ‘optimisation rate’ for
CO₂ em issions – a tech nical term that describ es the discrepa ncy between the
emissions recorded in homologation tests and the real drive ones recorded by
consumers or tested independently –continued to increase: from an average
of 8% in 2001 to 39% for models homologated in 2015 (Tietge et al. 2019).
In other words, the 18% reduction in CO₂ achieved by the European
automotive industry during this period in order to meet the 2015 target of
130g CO₂/km set by the EU CO₂ regulation introduced in 2009 was, in fact,
mostly the result of this optimisation: in real drive conditions the reduction
was one of only 3%.
After Dieselgate, the preservation of diesel technology as the main solution
developed by the European automotive industry to decarbonise new car sales
became an impos sible uphill bat t le . Wit h die sel sale s declin ing and loopholes
for optimisation eliminated in 2017, the average CO₂ emissions of European
new car sales increased and, by 2019, it was 27g higher than the 95g CO₂/ km
target set for 2020. The European automotive industry had to increase the
market share of EVs signicantly just to meet the CO₂ target and avoid the
penalties that, in 2020, would have amounted to 83 billion euros. The leap
in market share of EVs, from 3% to 11% in 2020, reected this survival
strategy. However, it did not yet mark a conversion towards an accelerated
electr i cat ion proc e ss and the pha sing out of the inter nal combu stio n eng i ne.
Two years previously, the 2017 initial proposal of the European Commission
to update th e CO₂ regula t ion and se t new reduction ta r gets for 2025 and 2030
Is Europe on track towards net zero mobility?
9WP 2024. 07
was still in line with previous policy and preserved technological neutrality
with no clear preference for BEVs. The 15% and 30% CO₂ reduction targets
it proposed for 2025 and 2030 meant that a mild electrication via hybrids
(HEVs) and PHEVs, coupled with a modest market share for BEVs, would
have been enough to keep the European automotive industry on track. In
commenting on the draft, Hass and Sander stated that ‘it had the VDA2’s
inuence written all over it’ (2019: 19).
This time, however, the Commission faced strong opposition from the
European Parliament: a coalition of 19 Member States led by France,
Italy and Spain pushed for higher targets for CO₂ reduction (20% in 2025
and 40% in 2030) and the creation of compulsory quotas for zero and
low emission vehicles (20% in 2025 and 35% in 2030). The VDA and the
European Automobile Manufacturers’ Association (ACEA) announced that
this ‘could spell the end of the European automotive industry’ (Haas and
Sander 2019: 20). After a marathon negotiation between the Commission,
Parliament and the Council, the nal result was a compromise that hardened
the terms of the Commission proposal for 2030 (a 37.5% reduction target
rather than 30%), but kept the principle of technological neutrality intact.
It was already clear that the power balance between the status quo coalition
and the pro-electric coalition was shifting.
Environmental NGOs like Transport & Environment and the ICCT had
successfully established a narrative in which electrication appeared as
the only way forward: the right technology that could x the failures of the
wrong technological choices of the past (T&E 2018). The status quo coalition
had also been weakened and fractured by the consequences of the Dieselgate
scandal. Volkswagen had distanced itself from ACEA, moving towards a pro-
electric position for both tactical and strategic reasons: cleaning its image
after Dieselgate and aligning Europe with the fast electrication already at
work in China, its main and most protable market. Volvo, under Chinese
ownership since 2010 when Geely bought it from Ford, also shifted to a
pro-electric position, taking the lead in the Platform for Electromobility, a
lobbying organisation created in 2015 that also included Renault and several
US pro-electric companies like Ford, Uber and Tesla.
When in 2019 the European Commission launched the Green Deal, with
the objective of engaging Member States in binding targets to reach carbon
neutrality by 2050, the ground was fertile for tilting the balance in favour of
an accelerated process of electrication. The ‘Fit for 55’ package launched
in 2021 had the automotive sector in the spotlight from the beginning, not
only because it had got completely o-track in terms of CO₂ reduction but
also because it had, with electrication, a relatively straightforward solution
2. VDA is the employers’ association of the German automotive industry and has been
identied as the most inuential lobbyist in shaping previous CO₂ regulations in 2009
(Klüver 2013) and 2013 (Nowack and Sternkopf 2015).
Tommaso Pardi
10 WP 2024. 07
to move back on track by 2030. There were still, however, some important
hu r d le s to ge t the Eu ro p ea n Pa rl ia me n t on bo a rd : the que s tion of em p lo y me nt ,
raised in particular by CLEPA, the European Association of Automotive
Suppliers, whose members are the most exposed to an accelerated phasing
out of the ICE sector (Strategy& 2021); the question of aordability, raised
by ACEA, which was an important source of concern for southern European
Member States as well as central and eastern European ones (ACEA 2020);
and the question of putting an end to the principle of technological neutral it y
with the proposed 2035 ban on ICEVs. The latter was expressly at odds with
German ordo-libera l principles of Europea n governance in which the ma rket
is supposed to select technologies and not the state.
The pro-electric coalition launched a series of studies to provide evidence
that an accelerated electrication by 2030-35 would: create more jobs for
the broad automotive ecosystem than it would destroy in the ICE sector
(BCG 2021); achieve cost parity between BEVs and ICEVs by 2026 (T&E and
BloombergNEF 2021); and see BEVs eventually become much cheaper than
ICEVs (in terms of total cost of ownership) due to their lower maintenance
and fuel costs (elementenergy 2021). Furthermore, alternative technologies
(green hydrogen, plug-in hybrids, synthetic fuels, biofuels, etc.) were shown
either as less economically viable (T&E 2021b) or as less environmentally
ecient (Bieker 2021).
The main hurdle, however, remained the potential opposition from the
German interest coalition, and in particular from BMW, Daimler and their
main German suppliers, that wanted to preserve ICE technology by relying on
the development of synthetic fuels. The behind the scenes compromise that
explains why Germany eventually endorsed ‘Fit for 55’ at both Parliament
and Council levels is not to be found in the new regulation but in what has
been left out of the update and from most of the debates that surrounded its
adoption.
From interviews with negotiators and lobbyists of the pro-electric coalition
in Brussels,3 it is clear that the price to pay for consenting to the 2035 ban
on ICEVs was to leave untouched the weight-based standards that the
German coalition had managed to squeeze into the CO₂ regulation back in
2009. As shown in a previous report for the European Trade Union Institute
(Pardi 2022), weight-based standards favour the manufacturers of heavier
cars and have contributed to moving the European automotive industry in
the wrong direction by ma k ing the av e r age Eu ropean car signicant ly he a v ier
and more powerful. By keeping weight-based standards, the ‘Fit for 55’
update therefore failed to address one of the main causes of the past failures
of the CO₂ regulation: upmarket drift and its environmental, economic and
social consequences. The next section looks back over the last 15 years of
CO₂ regulation and how weight-based adjustment became its integral part.
3. In 2023, we interviewed four representatives of environmental NGOs and four
representatives of automotive lobbies (ACEA, CLEPA).
Is Europe on track towards net zero mobility?
11W P 2024.07
2. Upmarket dri: regulatory causes and
socioeconomic consequences
As described in detail in that previous ETUI publication (Pardi 2022), the
rst volu ntary CO₂ targets negotiated by the Commis sion with ACEA in 1998
we re not weight-b ased. By 2005, ho weve r, it had bec ome cle a r that the ta r gets
would not be achieved, but the problem only concerned the manufacturers of
heavier cars- that is, the premium brands (Audi, BMW, Daimler and Volvo)
and Volkswagen – while the European generalist brands (Peugeot, Citroen,
Fiat, Renault) were on track, with Ford and Opel lagging slightly behind.
O n av er age , a 1 0% inc r ea se i n we i g ht le a ds to a 7% i n c re as e in fu e l c o n su m p tio n
(IEA 2019). Furthermore, heavier cars need more powerful engines that also
lead to higher fuel consumption: on average, a 10% increase in engine power
leads to a 5% increase in fuel consumption (ICCT 2017; Tietge et al. 2019).
This trend highlights the fundamental contradiction between, on the one
hand, upmarket drift – towards more expensive, more powerful and heavier
cars – and, on the other, the reduction of CO₂ emissions. It also shows that
upmarket drift preexisted the introduction of weight-based standards.
One of the main causes of upmarket drift had been another key European
regulation: the ‘whole vehicle type approval’ int roduced in 1992 to harmonis e
the technical parameters for homologating new vehicles for the Single
Market. The European Union, already under strong inuence from the VDA
(Haas and Sander 2019), had decided to harmonise these parameters (safety,
depollution, noise, etc.) with the highest standards of northern European
countries, in particular Sweden and Germany, its technical regulatory
strategy thereby adding weight, power and cost to the average European car.
The CO₂ regulation should have put a stop to the ination of such norms
and shifted the trend towards having lighter, less powerful and cheaper cars.
But this was seen as a major threat to the German premium model based
on upmarket drift, and Germany therefore lent all its weight on shaping the
regulation in a way that would not harm the premium model (Nowack and
Sternkopf 2015; Rohfritsch and Batho 2016). The introduction of weight-
based CO₂ standards was the short-term answer to this threat by giving more
time to the manufacturers of heavier vehicles to comply with the regulation.
As Transport & Environment had already highlighted at the time:
Weight-based CO₂ standards for cars are a very bad idea for the
following reason: they punish positive action. (T&E 2007)
Tommaso Pardi
12 WP 2024. 07
The Commission, by giving in to German pressure, institutionalised a CO₂
regulation that not only allowed the manufacturers of the most polluting
cars to have less demanding targets but which also, more importantly,
hindered the others, in particular the French and Italian generalist brands,
in developing alternative strategies based on lighter cars.
2.1 The environmental, social and economic
consequences of regulatory upmarket dri
Figure 1 below illustrates some of the consequences for new car sales of
regulatory upmarket drift.
The 10% of mass and the 26% of engine power that were added to the average
new car sold in the Single Market between 2001 and 2015 were equivalent to
a 21% increase in CO₂ emissions. During the same period, the automotive
industry was supposed to reduce CO₂ emissions by 20% in order to meet the
2015 target of 130g CO₂/km (as measured by the NEDC homologation test4)
whereas, to compensate for this extra mass and extra engine power, it was a
41% reduction that was actually required.
4. New European Driving Cycle; i.e. the basis for the test of fuel economy and emissions that
all cars must go through before going on sale. This was replaced in 2017 by the World
Harmonised Light Vehicle Test (WLTP) procedure.
Note: CO₂ real drive data is based on Tietge et al. (2019) up to 2018 and on SprintMonitor data by brand for 2018-2021.
Source: ICC T (pocketbook data); EEA data – author treatment.
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Price [EUR incl, tax] Mass in running order [kg]Engine power [KW]
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Figure 1 The upmarket dri of the average new car (EU, 2001-21)
Is Europe on track towards net zero mobility?
13WP 2024 .07
Part of this upmarket drift was driven by the process of the dieselisation
of new car sales as the main technological solution to reduce overall CO₂
emissions: diesel powertrains delivered on average a 27-37% fuel economy
over petrol ones (IEA 2019: 46), but they were heavier (by 50 kg on average
(T&E 2017), more expensive (9-21%) and emitted a much greater level of air
pollutants (Tietge et al. 2019). Even with diesels’ market share growing from
36% to 52% between 2001 and 2015, and with the market share of direct
petrol injection cars growing from less than 1% to 40% (a technology that
delivers a 7% reduction in CO₂ emissions), the total CO₂ reduction was not
enough to compensate for upmarket drift.
Ultimately, the industry delivered, in real drive conditions,5 only a 9%
decrease in CO₂ emissions between 2001 and 2015, half what had been
demanded, wh ich is wh y the op t imisa tion of homol oga tion tests via de d icated
devices was ‘required’ to eliminate the gap and full the target.
Following Dieselgate and the collapse in diesel sales, the average new car
sold in 2019 emitted only 5% less CO₂ emissions in real drive conditions
than in 2001, while being 12% heavier, 38% more powerful and 52% more
expensive: an utter technological and regulatory failure.
This paradoxical outcome was also driven by another direct consequence of
upmarket drift. The European generalist brands were forced by regulatory
pressure and weight-based standards to follow the premium brands
upm arket . As their tr aditional compact cars sold in the A and B segments had
to integrate more expensive premium technologies to comply with both sets of
regulation, they moved away from their customer base and lost market share
along the way. Only Volkswagen, the most expensive European generalist
brand (an average purchase price of 33,500 euros in 2021 compared with
25,700 euros for the generalist group), was able to preserve its market share.
The other generalist brands saw their market share halved on average (a
drop of 47% between 2001 and 2021). During the same period, the premium
brands increased their market share by 43%.
Not surprisingly, almost all the employment loss in the European automotive
industry during the last twenty years (2000-20) occurred in those countries
where the generalist brands locate their manufacturing: France (down by
87,000); Italy (30,000); and Spain (116,000).
In other words, the EU CO₂ regulation had favoured the sales of the
heaviest and most polluting cars manufactured by the premium brands to
the detriment of the lightest and less polluting cars manufactured by the
generalist brands.
5. Real drive data is provided either from dierent consumer databases where consumers
report how much fuel they use for driving their cars or from tests in real drive conditions
carried out on several dierent models by NGOs or independent laboratories/universities.
For a comprehensive list of these databases and tests see Tietge et al. (2019).
Tommaso Pardi
14 WP 2024. 07
Also, by making cars more expensive (the average price of new cars grew in
Europe by 66% between 2001 and 2021 against a general ination rate in
the euro area of 38%), upmarket drift made new cars in general a much less
eective solution to decarbonising the car eet. Between 2000 and 2021, the
European car eet grew by 36% (from 186 to 253 million vehicles) while new
car sales declined by 23% (from 13 to 10 million). As a result, the rate of eet
renewal fell from 6.9 to 3.8%. The lower the eet renewal rate, the longer it
takes to decarbonise the eet: 15 years in 2000, 26 years in 2021.
Furthermore, behind this European average there is a growing divide
between northern countries and southern, alongside central and eastern
European, ones. In northern Europe, the number of years required to renew
the whole car eet grew ‘only’ from 13 to 20; in southern Europe, where
purchasing power is lower, it grew from 13 to 29; and in central and eastern
Europe, it grew from 31 to 48. The result of these divergent dynamics is an
increasingly polarised access to recent cars: 67% of the car eet of less than
two years, and 65% of the car eet of less than 10 years, is located in northern
European countries; in contrast, 74% of the car eet older than 20 years is
located in southern and eastern European countries (where cars older than
30 years can represent up to 30% of the car eet (Pardi 2018)).6
It is precisely in those countries that have the least access to recent models
that CO₂ emissions from cars have increased the most during the last thirty
years: +241% in central and east European countries and +47% in southern
European ones, compared with a drop of 4% in northern Europe (Figure 2).
6. Source: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Passenger_
cars_in_the_EU
Source: EE A.
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Figure 2 Greenhouse gases from fuel combustion (cars), EU27
Is Europe on track towards net zero mobility?
15WP 2024 .07
Since upmarket drift is increasing with electrication, as the next section
demonstrates, this means that access to new cars becomes even more dicult
in these countries, leaving them without viable solutions to decarbonise their
car eets and meet the ‘Fit for 55’ targets.
Tommaso Pardi
16 WP 2024. 07
3. When electrification meets
upmarket dri
The ‘Fit for 55’ update of the CO₂ regulation has raised the ambition by
lifting the reduction target for 2030 from 37.5% to 55% (on 2021 emissions)
and banning all ICEV (including HEV and PHEV) new car sales in the EU
from 2035.7 This will result in a dramatic acceleration of electrication in
the coming years.
Between 2019 and 2021, the shares of EVs in new car sales increased
rapidly – from 2% to 9% for BEVs and from 1% to 9% for PHEVs – in order to
meet the 2021 target of 95g CO₂/km in the context of collapsing diesel sales
(Figure 3). Yet, most of the consequences of the ‘Fit for 55’ update will be
felt between 2025 (when the intermediate CO₂ target is 77g) and 2030, with
the nal target of 43g at the commencement of the phasing out of ICEVs in
2035.8 Such a scenario is also supported in that most European carmakers
have already announced that they will stop selling ICEVs in Europe in 2030.
7. Despite an exception made for e-fuels that deliver a 100% CO₂ reduction, a move pushed by
Germany.
8. To avoid confusion, NEDC values continue to be used in this paper for 2025 and 2030,
applying a conversion rate from the WLTP values. The ocial targets, however, are
expressed in terms of WLTP: 93.6g CO₂/km in 2025 and 49.5g CO₂/km in 2030.
Source: ACE A.
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Petrol [%] Diesel [%] BEV [%] PHEV [%] HEV [%]
Figure 3 Shares of EU sales of new cars by type of powertrain (2001-23)
Is Europe on track towards net zero mobility?
17W P 2024.07
As emphasised above, neither the rst post-Dieselgate update of 2019 nor
the 2023 ‘Fit for 55’ update have taken weight-based standards out of the
CO₂ regulation. This means that elec trication has been caught in reg ulatory
upmarket drift and now contributes to making the average new car sold in
Europe even heavier and pricier, and at a muc h fas ter pace tha n we wit nessed
during the dieselisation period.
Between 2010 and 2021 the average BEV and PHEV sold in Europe gained
respectively 551 kg (47% of mass) and 370 kg (23%), becoming at the same
time the most expensive worldwide: 48,000 euros for the former and
58,000 euros for the latter compared wit h 26,000 euros for the average ICEV
(Pardi 2022: 27).
By comparison the average BEV sold in China in 2021 was 500 kg lighter and
19,000 euros cheaper than the equivalent in Europe. Such a comparison is
useful because it shows that BEVs can be lighter and cheaper than ICEVs.
In China, the regulatory framework focuses on the improvement of the
energy performance of BEVs (Alochet and Midler 2019) and, since energy
performance is dependent on weight, it favours the sale of lighter and
cheaper vehicles. In Europe, weight-based standards incentivise the sales of
the heaviest (and more expensive) EVs. For instance, the 136 kg gained by the
average premium brand vehicle sold between 2019 and 2021 (a rise of 8% to
a gure of 1,815 kg), due to the increasing sales of PHEVs (2,025 kg; 23% of
total sales) and BEVs (2,163 kg; 7% of total sales), softened the CO₂ target of
the premium group by 17g on average, representing almost one-third of the
total CO₂ reduction achieved by the premium group since 2019 to meet the
2021 CO₂ target (T&E 2021a: 40). In contrast, the generalist group added
‘only’ 40 kg (a rise of 3% to a gure of 1,355 kg) during this period and was
therefore penalised with a hardening of its CO₂ target of 2g.
Upmarket drift is embedded in the EU regulatory framework, so the faster
electrication pushed by the ‘Fit for 55’ update both accelerates this and
amplies its negative outcomes, while making it more dicult for the EU
to deal with the specic challenges raised by electrication per se. We will
consider rst the environmental implications of such a trend before focusing
on the social and economic ones.
3.1 Environmental consequences: weight matters
also for EVs
This section analyses in more detail the data on new car sales in Europe
between 2019 and 2021 in order to assess the environmental impact of the
recent acceleration of electrication combined with the phenomenon of
upmarket drift. It also produces gures for the carbon footprint by brand
group based on assumptions about the total car lifecycle and average usage
per year.
Tommaso Pardi
18 WP 2024. 07
As said previously, during this period the share of BEVs and PHEVs jumped,
respectively, from 1.9% and 1.1% to 9.2% and 9%, decisively contributing to
an overall reduction of the 35g CO₂/km (a drop of 23%, based on the WLTP
homologation test) required to meet the 2021 target of 95g CO₂.9
When we consider the performances of the dierent groups of brands based
on WLTP-measured CO₂ emissions (Figure 4), it seems that dierences
in weight and power do not really matter for EVs. Indeed, the group that
reduced CO₂ emissions the most between 2019 and 2021 is the premium
group (a drop of 26%), whi le the genera list group only achieve d a reduction of
22% despite selling cars that were, on average, 460 kg lighter than those sold
by the premium group. If the average premium car still emits more CO₂ than
the generalist one (121g vs 112g), the dierence now appears to be relatively
small: only 9g (8%) higher despite that extra 460 kg.
The issue here is that the WLTP test is badly equipped to measure the CO₂
emissions of electric vehicles. First, while it does measure how many watt
hours per kilometre (Wh/km) an EV consumes during the test, it does not
translate this into CO₂. This means that EVs are considered zero emissions
vehicles when used in electric mode and that the dierence in energy
eciency between heavier and lighter BEVs is not accounted for. Second, the
WLTP test largely underestimates emissions from PHEVs, which represent
23% of the sales of the premium group (but only 5% of those of the generalist
group), because it assumes that PHEVs are driven most of the time in electric
9. In fact, the CO₂ emissions of the average European car are still above this target in WLTP
terms, at 116g CO₂ (from an average of 151g in 2019), but were translated in NEDC terms
(the previous homologation test) to 91g CO₂ (also called the ’21% uplift’ negotiated by the
Commission with the ACEA to ease the transition between the two tests).
Source: EEA data, author extraction and treatment.
110
120
130
140
150
160
170
2019 2020 2021
Premium WLTP Volkswagen WLTP Generalist WLTP
Figure 4 CO₂/emissions, grammes/km (as recorded by the WLTP homologation test)
by groups of brands (2019-21)
Is Europe on track towards net zero mobility?
19WP 2024 .07
mode, which is not the case in real drive conditions. According to several
studies and consumer data, PHEVs emit, on average, four times more CO₂ in
real drive conditions than in the WLTP test (Krajinska 2023).
Once we correct the data to take into account real drive (RD) emissions (see
Annex on calculation methodology), the picture changes signicantly.
As we can see in Figure 5, in real drive conditions, the CO₂ reduction
achieved by the premium group between 2019 and 2021 drops from a gure
of 26% under WLTP to one of only 11%; while for the generalist group it drops
from 22% (see Figure 4) to 18% (Figure 5). Also, the gap in 2021 between the
average cars of the two groups in terms of CO₂ emissions widens: from 9g
CO₂/km under WLTP to 46g in real drive conditions. Most of this increasing
gap is due to the hig her share of PHEVs in the sale s of the prem ium group, but
also to the higher energy consumption (an increase of 18%) of their heavier
BEVs in comparison with those sold by the generalist group.
Even RD data do not capture the full environmental impact of EVs. EVs,
and in particular BEVs with large batteries, require much more energy
to be manufactured than equivalent ICEVs. They have, therefore, larger
CO₂ footprints and it takes some years of usage, depending on the carbon
intensity of the energy used, before a BEV emits cumulatively less CO₂ than
an equivalent ICEV.
Lifecycle analysis (LCA) allows the integration of these CO₂ emissions in the
calculation of the grammes of CO₂ emitted per km by the average car sold by
our groups of brands.
Source: EEA data, author extraction and treatment.
130
140
150
160
170
180
190
200
210
2019 2020 2021
Premium RD Volkswagen RD Generalist RD
Figure 5 CO₂/emissions, grammes/km (real drive emissions based on consumer
data) by groups of brands (2019-21)
Tommaso Pardi
20 WP 2024. 07
There is no standard methodology available yet for LCA and, depending on
the ways it is set up, the res u lts are subje ct to cha nge. The two mo st imp ortant
parameters to be taken into account are the duration of the lifecycle – the
longer a BEV is used, the less it emits per km in comparison with an ICEV;
and the carbon intensity of the energy used. Despite some discrepancies due
to the dierent ways of setting these parameters, all LCAs show that lighter
BEVs emit signicantly less CO₂ than heavier ones during their lifecycle.
For example, the 2023 A2MAC1 and M@air study10 shows that a Tesla Y
(1,995 kg) or a VW ID4 (1,891 kg) will emit 19-20 tons of CO₂ over a lifecycle
of 125,000 km when used in France, and 30 tons when used in Germany,
while a Dacia Spring (970 kg) or a Renault Twingo Electric (1,170 kg) will
emit 50% less. The 2023 Green NCAP study,11 with a dierent energy mix
(EU27 average) and a longer lifecycle (240,000 km), shows similar results:
an Audi E-tron (2,242 kg) will emit 36 tons of CO₂ while a Renault Megane
E-Tech (1,684 kg) or a Dacia Spring will emit respectively 26 tons (28% less)
and 18 tons (50% less).
For this paper’s calculations, a lifecycle has been set of 200,000 km
(11,000 km per year) with energy consumption based on the average EU27
mix and a decarbonisation rate of 20% per decade, corresponding to the
current reduction rate over the last ten years (2013-22). In order to perform
the LCA, the Climobil tool developed by the Luxembourg Institute of Science
and Technology has been used (see methodology in Annex).
10. https://maair.fr/en/lempreinte-carbone-des-voitures-electriques-les-plus-vendues-en-
france-et-en-allemagne-en-2022/
11. https://www.greenncap.com/european-lca-results/
Source: EEA data, author extraction and treatment using Climobil tool
(https://climobil.connecting-project.lu/).
180
190
200
210
220
230
240
250
260
270
2019 2020 2021
Premium LC Volkswagen LC Generalist LC
Figure 6 CO₂/emissions, grammes/km (based on lifecycle analysis of
11,000 km/year and a total of 200,000 km) by brand group (2019-2021)
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21WP 2024.07
When the full lifecycle is taken into account, the reduction of CO₂ emissions
achieved by the premium group between 2019 and 2021 drops to 7% while
that for the gener alist gr oup falls to 14%. Also the gap between the two gr oups
further increases, to 58g (from the 9g recorded under WLTP).
Two conclusions can be drawn from these results.
The rst, which is common among LCAs, is that weight does matter, even
for EVs. Heavier EVs emit more CO₂ than lighter ones in RD conditions
and during their lifecycle: in 2021 the average generalist BEV (1,561 kg;
LC 101g CO₂/km) emitted 24% less tha n the average premium BEV (2,163 kg;
LC 133g CO₂/km) . Also, the ext r emely he av y PH E Vs sol d in Eu r o p e em i t more
CO₂ than lighter ICEVs in RD conditions: this is the case for instance of the
average premium petrol PHEV (2,297 kg; RD 166g CO₂/km) in comparison
with the average generalist petrol car (1,234 kg; RD 139g CO₂/km).
The second conclusion is that the WLTP homologation test fails to account
for these dierences and favours the manufacturers of the heavier and
more polluting cars (the premium group) that benet from an optimisation
rate of their CO₂ emissions (when WLTP emissions are compared with RD
ones) of 48% compared with just 18% for the generalist group. This much
higher optimisation also allows the premium carmakers to keep selling high
polluting ICEVs: according to T&E (2021), eight of the ten most polluting
ICEVs sold in 2021 (emitting more than 160g CO₂/km (WLPT)) were sold by
the premium group (six) and by Volkswagen (two), with none being from the
generalist group.12
Combined with weight-based standards, this bias in the homologation test
signicantly reduces the environmental benets of electrication. Once
more, it is pushing the market in the wrong direction – towards heavier and
less energy ecient cars rat her than lighter ones. Also, as is ex plained below,
this makes new cars much less aordable, further reducing their capacity to
decarbonise the car eet while exacerbating the growing inequality in access
to green mobility both within and between countries.
3.2 Social consequences: a growing divide between
rich and poor countries and households
Between 2019 and 2021, the average price of a new car sold in Europe
increased by 9% compared with an average Euro area ination rate of 2.8%.
This acceleration in upmarket drift was driven by electrication. The increase
has been partially absorbed by the subsidies given by states to promote the
uptake of EVs. In 2021, 12.5 billion euros were given to buyers of EVs, an
amount that represented 3.5% of the total ocial price of all cars sold in
12. The other models among the top ten polluters were the Kia Sportage and the Mazda CX-5
which are outside the scope of this paper’s analysis.
Tommaso Pardi
22 WP 2024. 07
Europe that year. On average, each EV sold saw its owner receive 5,100 euros:
11% of the average price of a BEV (48,000 euros) and 9% of that of a PHEV
(58,000 euros) (Bibra et al. 2022: 47).
These subsidies were concentrated in northern European countries:
between 2019 and 2022, 82% of EV sales were located in northern European
countries that represent 49% of the EU population, compared with 18% in
southern European countries and central and eastern ones that, together,
represent 51% of the EU population (see Figure 7). In terms of EV stocks,
the divergence is even wider: 86% is concentrated in northern Europe, 13%
in southern countries and just 1% in central and eastern European ones.
In addition, these subsidies went mainly to the wealthier households even
within northern European countries, given the extremely high prices of EVs.
This means that the divide between wealthier and poorer countries and
wealthier and poorer households in Europe is increasing when it comes to
access to greener mobility. It is the reverse of this that is urgently needed to
achieve the ‘Fit for 55’ targets.
Furthermore, despite the subsidies, the accelerated upmarket drift combined
with electrication is making new cars much less aordable in general,
aecting the level of sales and the car eet renewal rate. In the period
2020-22, it was dicult to measure this impact due to the Covid-19 crisis
and the global shortage of chips. In 2023, however, the market was back to
almost normal conditions and, while total new car sales have been growing,
these were still 13% below their 2019 level in nor thern Europe, 17% in central
Source: ACE A.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2019 2020 2021 2022 2023
North European countriesSouth European countriesCentral and east European countries
Figure 7 Share of BEV sales by groups of EU countries (2019-2023)
Is Europe on track towards net zero mobility?
23WP 2 024. 07
and eastern Europe and 35% in southern Europe. At these levels of sales, it
will take 18 years to renew the northern European car eet (compared with
13 years in 2000), 26 years in the southern European one (13 years in 2000)
and 43 years in central and eastern Europe (31 years in 2000).
In 2023, Germany, the main EV market in Europe, was one of the rst
nor thern Europea n countries to phase out subsidies for PHEVs that, in 2022,
had pr ovided up to 6,750 euros per car, and to reduc e subsidie s for BEVs fr om
9,000 euros per car to 6,750. The result was an imme diate drop in EV sales of
32%: a reduction of 60% for PHE Vs and one of 12% for BEVs. In 202 4, neither
will there be more public subsidies for BEVs, and sales are expected to decline
further. Clearly, even in northern European countries with high purchasing
power, the current process of electrication is not sustainable without public
subsidy. But such subsidies are politically and socially problematic (because
they benet mostly wealthy households) and it is dicult to imagine that
EU Member States can aord them for much longer (due to the increasing
market share of EVs and the end of the exceptional favourable budgetary
conditions generated by the Covid-19 crisis).
The social consequences of this increasing divide in accessing recent cars are
already visible. As the supply of new and/or recent models shrinks, consumers
tend to keep their old ICEVs longer.13 Among st the negative side eec ts of this
trend are more safety risks, higher fuel costs and higher maintenance costs
for those who cannot aord new cars or more recent models.
But as electrication spreads amongst the richest countries and households,
there will be further negative consequences for those excluded from this
greener mobility. On the one hand, a growing number of large and medium-
sized cities have already started to ban older cars from their roads and,
eventually, only BEVs or low emissions vehicles will have access to city
centres. On the other hand, even in EU Member States and cities without
such measures, from 2027 (or 2028, if fuel prices are exceptionally high)
all owners of ICEVs will be exposed to the eects of the European carbon
market (ETS 2) for transport.
The purpose of this second carbon market, introduced with the ‘Fit for
55’ package in 2023, is to guarantee that Member States will keep their
com m i t ment s in ter m s of CO₂ reduct ion in the tr a n s p or t and hou s i ng sector s .
The EU will auction CO₂ emission permits, or allowances, to local fuel
distributors, corresponding to the right to emit one ton of CO₂. The supply of
these will diminish in time according to the 2030 EU ‘F it for 55’ inter me diate
target (a reduction of 42% on the 2019 level) and the carbon neutrality
objective of 2050. In an EU Member State where fuel consumption does not
diminish fast enough, local fuel distributors will have to buy more permits.
On the contrary, in a Member State where fuel consumption diminishes
13. Between 2019 and 2021 the average age of the European car increased by 4%, or 6 months
(from 11.5 to 12 years) (source: ACEA).
Tommaso Pardi
24 WP 2024. 07
at a faster rate, local distributors will be able to sell permits to those who
need more. Depending on the interplay between diminishing supply and the
overall level of demand, the price of the allowances will increase in time by a
lesser or larger amount.
Up to 2030, the price for one allowance is expected to be kept below 45 euros,
but after 2030 it will be for the market to decide. It has been calculated that
a price of 50 euros per ton will result in an average additional annual cost of
363 euros per European household, equivalent to 0.6% of average disposable
income (but up to 1% in central and eastern European countries). During
this period, ETS 2 will thus work as a more or less mild tax on CO₂ for ICEV
owners. Several experts have pointed out, however, that the price control
mechanism does not prevent spikes above 45 euros as it is activated ex post
should such spikes occur, and could prove insucient if the decarbonisation
of road transport does not progress fast enough.14
In any case, the main question is what will happen after 2030, when the
market freely dictates the price of the allowances, in particular in those
countries that cannot or would not be able to electrify their car eets fast
enough.
The example of the rst ETS market, created in 2005 for reducing CO₂
emissions in the energy and heavy industry sectors, can be used here to
illustrate some possible scenarios. For a long period of time, the ETS 1 price
for one ton of CO₂ remained ver y low (around 10 euros) due to the oversupply
of allowances. This was due in particular to the 2008 nancial crisis, whose
impact on manufacturing activities reduced the demand for energy. However,
ETS 1 was reformed in 2018 so that, in the case of oversupply, surplus
allowances, including future ones, are permanently cancelled (the same
mechanism will apply in ETS 2). Following the fur ther reform of ETS 1, when
in 2021 the economy started to grow again in the wake of the Covid-19 crisis,
demand rose back quicker and stronger than expected. Gas prices increased
and energy producers started to buy more allowances anticipating the need
to burn more coal to produce energy. The price of one allowance spiked in
2021 from 20 euros (for one ton of CO₂) to 81 euros, and then again from
67 euros in 2022 to 105 eu ros in 2023 due to the energy cr isis tr iggered by the
Russian invasion of Ukraine (a ten-fold increase by comparison with 2018).
In the case of ETS 2, similar spikes are possible. We know that the market
share of EVs, and in particular of BEVs, must grow signicantly to meet the
2030 CO₂ target of 49.5g (a drop of 55% on the 2021 level). At least 60% of the
market will have to be fully electried (BEVs) but, as mentioned earlier, most
European car groups have already announced that, by 2030, they will only
be selling BEVs so this percentage is likely to be higher. Under the associated
cond i t i o n s of a slow do w n in th e eet renewal rate, it wil l be al most imp o s s i b le
14. See for instance: https://www.euractiv.com/section/road-transport/news/eu-carbon-
market-gas-petrol-prices-could-spike-from-2027-experts-say/
Is Europe on track towards net zero mobility?
25WP 2 024. 07
to meet the CO₂ emissions reduction targets for fuel consumption in cars (a
reduction of 42% between 2019 and 2030), all the more so when considering
that the European car eet keeps growing, in particular in central and
eastern Europe where CO₂ emissions are also growing (see Figure 2 above).
The result of these dynamics will be a signicant increase in the price of
ETS 2 allowances, whose supply will be reduced by 5.38% annually from
2028. For instance, the European Consumer Organisation (BEUC) has not
excluded that the price for one allowance could spike at 250 euros as early as
2030.15 If that were the case, it would result in an average additional annual
cost of 1,815 euros per European household, equivalent to 3% of average
disposable income (and around 6% in central and eastern Europe) (Abrell et
al. 2022; Platteau 2023).
Also, this price increase will not be homogenously spread across Europe. As
mentioned earlier, countries where CO₂ emissions are diminishing the least
will be those with the highest price increase because their fuel distributors
will have to buy more allowances. The consequences could therefore be
dramatic for southern European countries and central and eastern ones:
rapidly ageing car eets, growing CO₂ emissions and fast rising fuel prices
with no viable solutions to reduce them.
That this scenario is possible and even probable can be deduced from the
EU’s decision to allocate 25% of the revenues generated by the sale of ETS 2
allowances to a newly created Social Climate Fund to support vulnerable
households and small businesses to cope with fuel price increases. The other
75% will go to Member States that will have to use it to nance social climate
measures, notably to facilitate access to electric cars (although only 25%
of this amount could be used to reduce the impact of price increases). The
money will be redistributed progressively so that those countries that are the
most vulnerable to fuel price increases will receive a higher share of the SCF.
However, the total amount available has been capped at 59 billion euros for
the period between 2027 and 2032, when the SCF will be discontinued. Such
an amount cor respond s to 8.4 bil l ion euros av a i lable an nua lly to 27 count r ies.
By way of comparison, the policies put in place in France alone to reduce
the impact of energy price increases between 2021 and 2023 amounted to
85 billion euros.16 Furthermore, the ETS 2 mechanism will rst raise the
price of fuel for consumers and only after that can national governments
intervene to address such increases. How eciently they will do it and with
what delays remains to be seen.
To summarise, if European Member States are on the right track to
decarbonise road transport, then ETS 2 will have a limited impact on fuel
prices but, thanks to its redistributive eect via the SCF, it will do something
15. A recent survey of modelling based on European CO₂ emissions targets suggest a range of
price between 175 euros and 300 euros for ETS 2 allowances from 2030 (Abrell et al. 2022).
16. Source: https://www.vie-publique.fr/en-bref/290156-aides-la-consommation-denergie-
un-cout-estime-85-milliards-deuro
Tommaso Pardi
26 WP 2024. 07
to help laggards catch up. This is the rationale behind its implementation.
Ho w e ver, if ac c e lerated el e c t ri c at ion cou pled wi t h re g u lato r y upma rket drif t
proves socially unsustainable, in particular in southern European countries,
as well as central and eastern European ones where CO₂ emi ssions from cars
have increased the most in the last 30 years, then ETS 2 will lead to sharp
increases in fuel prices while its redistributive eects will not be sucient to
address the social and political consequences of such a development.
3.3 Economic consequences: fast growing imports and
declining market shares for generalist carmakers
Between 2019 and 2023, European brands lost market share of 3 percentage
points to foreign brands (from 76% to 73%). The main cause of this loss was
that, with the progress of electrication, Europe’s lower market share in BEV
sales became more apparent.
In 2023, the market share of European brands in BEV sales was 63% (in
contrast to a tota l sales gure of 73%). This is not surprising: as mentioned in
the Introduction, European brands had a competitive advantage in ICEV, in
particular in diesel powertrains and in compact petrol injected powertrains,
both of which were required to meet the CO₂ targets set by the European
Commission. This advantage played an important protective role in the
process of trade liberalisation for automotive products pursued by the EU
since the late 1990s.
In contrast, in the BEV market, European carmakers suer a double
competitive disadvantage against BEV manufacturers such as Tesla and
many Chinese carmakers. On the one hand, these new companies have a cost
and technological lead in BEVs: they started earlier to the mass production of
BEVs, are more vertically integrated in the battery value chain and have higher
economies of scale, better cost structures, proportionally much higher capital
evaluation and easier access to capital for investment. On the other hand,
European carmakers are handicapped in this race towards electrication
because they must simultaneously phase out the production of ICEVs while
building up the production of BEVs in a very short period of time.
The Chinese BEV market, currently the biggest and most competitive in the
world (3,606,680 units over the rst eight months of 2023), is dominated
by independent Chinese carmakers. Their total market share is 72%, with
Tesla having 17% and the European brands capturing just 4% of BEV sales
(Inovev n.d.).
It is also important that Chinese brands have only just started to penetrate
the European market where two brands, MG (SAIC) and Polestar (Geely),
represent more than half of total Chinese sales on the basis of only ve
models sold, although more than fty models from Chinese brands were
imported by Europe in 2023. SAIC and BYD have already announced plans
to manufacture BEVs in Europe, anticipating a steady growth of sales (in
Is Europe on track towards net zero mobility?
27WP 2024. 07
December 2023, BYD announced it would establish its BEV manufacturing
plant in Hungary). In the meantime, China has already become the primary
exporter of cars to Europe (521,881 cars in 2022 (source: ACEA)), ahead of
Korea and Japan.
Moreover, Tesla has announced that it will double its European production
capacity to one million cars per year, manufacturing a second new model
beside the model Y, which established itself as the best-selling car in Europe
in 2023. This expansion will make the Tesla assembly factory in Berlin the
largest in Europe.
If all European carmakers are suering from the foreign oensive on BEVs,
once more it is the generalist brands, which dominated the European market
in the 1990s, that are those suering the most. Figure 8 shows that their
market share is not only being attacked by direct price competition from
Tesla Chinese importers and Japanese/Korean brands, but it is also being
further squeezed by the accelerated upmarket drift that keeps pushing the
market away from their consumer base, in particular in the BEV market.
Sources: CCFA, Inovev.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2019 2023
Premium (Audi, Mercedes, BMW, Volvo)
+JLR+Mini Volkswagen
Seat
Generalist
(Renault, Peugeot, Citroën, Ford, Opel, Fiat)
Low cost (Skoda, Dacia) Japanese (Toyota-Nissan)
Korean (Hyundai, Kia) Tesla
Chinese brands Others
2023
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Figure 8 Market shares of new car sales, EU27 (total market 2001-2019-2023 –
le/BEV market 2023 – right)
Tommaso Pardi
28 WP 2024. 07
Between 2019 and 2023, the market share of the generalist group fell from
32 % to 27% (fr om 51% in 20 01), while the Vol k s w a gen bra nd and the pr emium
group preserved or increased their market shares respectively.
In the BEV market, the generalist group is performing worse than the
European average: market share is down to 22% in comparison with 26% of
total sales, while Volkswagen and the premium group have similar market
shares in BEV as in total sales (respectively 10% and 22%, compared to 11%
and 21%). This is not surprising given the relative average prices of BEV and
ICEV cars sold in Europe in 2023.
The combined impact of increasing import penetration and the further
squeezing of the generalist group’s sales could have disrupting consequences
for several European regions where car production is clustered, in particular
where the cars of the generalist brands are, in the main, manufactured
(France, Italy, Spain, Poland, Slovenia).
Electrication per se, all other things being equal, is already expected to
destroy a signicant amount of jobs in automotive manufacturing because
the pr o duction of an electr ic powe r train requires between 50% and 75 % fewer
workers than a conventional one. For instance, according to a study made
by CLEPA in 2021, even if we assume that (a) all the batteries and electric
power t rains requ ired for the 100% BEV market of 2035 will be ma nuf act u red
in Europe and (b) sales will recover their 2019 level, 600,000 jobs will still
be lost in the automotive sector during the next ten years (Strategy& 2021).
However, with accelerated upmarket drift it is unrealistic to expect a full
recovery in the new car market. In 2023, sales were 18% hig her than in 2022,
but still 20% below their 2019 level.
In a smaller market, the fast declining market share of the generalist group
may lead rapidly to signicant redundancies and factory closures. In 2022,
the utilisation ratio of European production capacity in the generalist group
was at a historical low of 50% (compared to 61% in VW and 65% in the
premium group).17 In other words, the generalist carmakers had twice as
many factories and workers as needed. In 2023, the situation was slightly
improved in some regions but the special conditions that made such a low
utilisation rate bearable – no competition due to the shortage of chips and
the generalised temporary unemployment measures subsidised by states in
response to the Covid-19 crisis – were disappearing.
Overall, European car production in 2023 should remain at a gure 20%
below that of 2019, but with important variations by country, as shown in
Figure 9: from rises of 11% and 7% for Morocco (ultra-low cost oshoring
from France, Romania and Spain) and Belgium (premium BEV production
17. Source: Inovev – https://www.inovev.com/index.php/en/automotivemarket-
sheet?option=com_cck&course_id=14842
Is Europe on track towards net zero mobility?
29WP 2 024. 07
of Volvo and Audi); to drops of 10% in Germany (at the core of European
premium sports utility vehicles and BEV production) and to ones of 63%,
45% and 41% for, respectively, Slovenia, France and Poland (fast declining
generalist ICEV production not compensated in the context of a slow uptick
in BEV production). As a result of these trends, France and Italy, the two
main countries of the generalist carmakers, which represented in 2000 30%
of European car production, are now reduced to 10%, one-third of the size of
Germany alone.
* First nine months.
Source: ACE A, Inovev.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2019 2023* 2023* (BEV)
Germany
Spain
France
Czech Republic
UK
Slovakia
Turkey
Italy
Romania
Hungary
Poland
Morocco
Portugal
Sweden
Belgium
Slovenia
Netherlands
Austria
Figure 9 Car production in Europe (including UK, Turkey and Morocco) – all models
(2019-23)/BEV cars only (2023) – (% of total production)
Tommaso Pardi
30 WP 2024. 07
Conclusions
The purpose of this paper was to evaluate whether the ‘Fit for 55’ update of
the Europea n Commission’s CO₂ regulation, which bans ICEVs from 2035, is
up to the task of decarbonising road transport by 2050. The paper’s analysis
indicates that it is not.
The main problem with the update is that it embarks on an ultra-accelerated
transition towards electrication without addressing the causes of the past
failures of European CO₂ regulation. If in the course of the last twenty-ve
years CO₂ emissions from cars have been growing almost continually in
Europe, the problem has not (only) been the technology used, but also (and
mainly) that, during this period, the structural characteristics of the average
new European car sold in Europe have been moving in the wrong direction.
Rather than becom ing lig hter, less powerful and cheaper, so as to reduce CO₂
emissions and accelerate the diusion of greener cars, the average new car
has become heavier, more powerful and less aordable.
This ‘upmarket drift’ has, to a large extent, been driven by two key European
regulations shaped by German/premium group interests: the whole vehicle
ty pe approval regime that harmonised EU technica l norms for new cars with
the higher technical standards of northern European countries, where cars
tend to be heavier, more powerful and more expensive than in the rest of
Europe; and the weight-based CO₂ standards that not only protected these
heavier premium cars from eective CO₂ regulation, but also hindered the
generalist carmakers from making lighter and cheaper cars to reduce CO₂
emissions.
Under these conditions, dieselisation was the only way of reducing CO₂
emissions but, coupled with upmarket drift, it proved utterly inecient and
led to the Dieselgate scandal. The ‘Fit for 55’ update should have been the
opportunity to change the CO₂ regulation, and not only the technologies
used in car manufacture, in order nally to push manufacturing in Europe
in the right direction. The consequences of having missed this opportunity
could compromise the EU Green Deal.
The EU Green Deal is based on three pillars: promote the most ecient
process of decarbonisation; achieve a just transition that does not leave
anybody behind; and protect and develop European industries. By coupling
preexisting upmarket drift with an accelerated process of electrication, the
‘Fit for 55’ update is now producing the opposite results.
Is Europe on track towards net zero mobility?
31WP 2024.07
First, it continues to prioritise the heaviest, most polluting and least
energy ecient cars even when they are electried, biasing competition in
favour of the premium manufacturers of such cars that benet from much
less demanding CO₂ targets and a much higher optimisation rate of CO₂
emissions in homologat ion tests than the generalist manufacturers of lig hter,
more energy ecient cars.
Section 3 shows how, for EVs, weight matters even more than for ICEVs.
Lighter BEVs require much smaller batteries, fewer materials and much
less energy when they are produced and used. Smaller BEVs allow for much
smaller carbon footprints, but also for much more aordable prices. This
is, for instance, the path followed by the Chinese process of electrication
where the recent fast growth of micro electromobility has been driven by
consumers alone, with no subsidies from the state (Alochet and Midler 2021;
Zhang et al. 2024).
On e of the bi g gest pr oblems of th e tr a nsit i on tow a rds EVs in Europ e is that we
are electrify ing the conventional multipurpose cars of the twentieth century.
Consumers are still being pushed towards buying oversized, overpriced and
overpowered electric cars to full all their mobility needs in one vehicle. If
the average European BEV sold in 2021 had a mass of 1,722 kg (2,163 kg for
the premium group) – 400 kg more than the average petrol car and 500 kg
more than the average Chinese BEV – it is because such a BEV has the size
and the autonomy to carry the whole household over more than 500 km
three times per year for summer and winter holidays while, for 99% of the
remaining time, it will be driven empty with only the driver onboard. The
most ecient path toward s dec a rbonisat ion is the reverse: integ rat ing lighte r
and cheaper BEVs with an array of public and private mobility services using
digital technologies that are now widely available; in other terms, changing
our mobility system, not just electrifying vehicles.
Second, by promoting heavier BEVs and PHEVs, and by disincentivising
the production and sale of lighter BEVs and PHEVs in Europe, the ‘Fit for
55’ regulation sharply accelerates upmarket drift, making cars even more
unaordable than before. The result is that the divide that upmarket drift
had already created between northern, southern, and central and eastern
European countries, and between social classes, in terms of access to new,
recent, greener cars, is now growing more rapidly. Those who are excluded
from access to recent cars, and even more from access to electric models, are
precisely those countries and social classes that are the most dependent on
cars for their mobility and which have the oldest and most polluting eets.
Those who most need access to aordable electromobility to full the ‘Fit
for 55’ objective for 2030 and achieve carbon neutrality in 2050 have no
possibility of doing so.
The risk is that such a social and geopolitical exclusion from the EU green
transition will result in increasing political opposition to electrication
which, in turn, will also be exacerbated by the forthcoming introduction, via
the ‘Fit for 55’ package, of a carbon market for road transport. Section 3.2
Tommaso Pardi
32 WP 2024. 07
reports how, starting from 2027, and without any protective regulation of the
carbon price from 2030, ETS 2 will increase the price of petrol and diesel in
a volatile and unpredictable way, further discriminating against the owners
of ICEVs but also further thre atening the polit ica l viabi lit y of the Green Deal.
Th i rd, by accelerating the pro c ess of elec t r i cat ion , throu gh the least e cient
pathway, the ‘Fit for 55’ update exposes the European automotive industry
to a perilous transition. While European carmakers will have the burden of
phasing out annual industrial capacity of 15 million ICEVs in slightly more
than ten years, companies like Tesla, and the several Chinese manufacturers
that have already started to enter the Single Market with their cheaper BEVs,
will enjoy a signicant cost and technological advantage. Since the start of
accelerated electrication in 2020, European brands have lost 8% of their
market share and, in the BEV segment, they control just 63% of the market
and face increasing competition.
In this already dicult context, it is the generalist carmakers that will
face the hardest task: they have already been weakened by twenty years
of upmarket drift; they will be the most exposed to the price competition
imposed by the Chinese carmakers; and they will continue to lose market
share as a result of the accelerated upmarket drift caused by electrication.
In this case, political opposition to electrication could appear on economic
grounds, as has recently been seen with the opposition to the Euro 7 norm
for air pollutants rst raised by Italy and the Czech Republic, and eventually
endorsed by the majority of EU automotive countries, including France and
Ger m a ny.
If the analysis reported in this paper is correct, there is an urgent need to
rectify the ‘Fit for 55’ update and, more generally, the trajectory taken by the
electrication path in Europe. There are, however, a few key and relatively
straightforward measures that could steer the production and sale of new
cars in Europe towards a more sustainable, inclusive and ecient path.
The rst and most evident of these is the immediate phasing-out of weight-
based CO₂ standards. This could be justied on several complementary
grounds including environmental ones – promoting greener cars; social
ones – promoting more aordable cars; and economic ones – promoting the
European car industry.
Such a measure would, however, not be sucient without rethinking the
technical norms for cars, in particular for BEVs. Inspiration could be taken
here from the technical norms for micro key-cars in Japan, where CO₂
emissions from cars diminished by 23% between 2001 and 2019 (whereas in
Ger many the y incre a s e d during the sa me perio d by 3%), or from the techn i c a l
norms for New Energy Vehicles in China. In any case, such norms should not
be harmonised to the highest possible technological standards, but towards
those embodied in the most aordable and ecient average car which would
encourage the more rapid decarbonisation of the European car eet.
Is Europe on track towards net zero mobility?
33WP 2024. 07
Th e secon d measu r e shou ld cons i st of int rodu cing energy ec ienc y as th e key
discriminator in shaping the supply of new cars in Europe. Without weight-
based standards, energy eciency can be achieved by reducing the weight,
but also by improving battery technology or the aerodynamics of BEVs. The
current WLTP test could easily be updated to integrate such a measure, wh ile
it could also be established that only cars that full a certain level of energy
eciency could either be homologated or allowed to receive subsidies from
national governments. This is again the path taken by Chinese regulations
for BEVs. In a similar way, a more realistic utility parameter for calculating
PHEV emissions should be introduced. Since 2022, on-board devices in new
cars have been recording real drive consumption and emissions, and this
data should be used to calculate a new utility parameter for PHEVs in order
to improve their design towards lower emissions vehicles.
The third measure should integrate lifecycle analysis in order to allow
consumers to discriminate between new cars not only on energy eciency
but also on their carbon foot pr int. Such an additional measure would fu rther
push carmakers to make lighter cars, using fewer materials and less energy
and to locate their production in Europe (rather than importing BEVs from
China), in pa rticular in count ries where energy has a low carbon content. It is
interesting to note that the new French ‘eco-bonus’ for the purchase or rental
of BEVs will integrate a carbon footprint threshold. This measure is a much
more eective way of tempering the import of BEVs from China than the
current anti-subsidy investigation started by the European Commission on
4 October 2023. The latter, in the best case scenario, will slow down imports
from China, but it will be a dicult process and it is unclear whether it is
in the interests of Europe to start a trade war with one of its main trading
partners. Market regulations based on energy eciency and the carbon
footprint will not stir up trade frictions but they would result in a more
eective path towards decarbonisation.
These measures together should steer the production and sale of new cars
in Europe in the right direction: towards greener, more energy ecient,
aordable, electric cars that are made in Europe. But they also need to push
towards a more comprehensive transformation of our mobility systems.
In order truly to reverse upmarket drift and its long-term consequences,
such measures are required but they will not be sucient. The whole system
of national subsidies for both the production and sale of BEVs must be
recongured increasingly or even exclusively to support aordable BEVs or,
even better, more aordable electromobility services, with a clear priority
for social groups that are the most dependent on cars and the most excluded
from recent car ownership.
More generally, increasing opposition to electrication from southern
European countries, as well as central and eastern European ones, and
from lower income social classes, needs urgently to be addressed. In the
US, the Ination Reduction Act provides a good example of how to make the
availability of the massive state aid required by electrication contingent on
Tommaso Pardi
34 WP 2024. 07
social clauses which protec t employment, wages and labour condit ions in the
automotive and battery industries. Without such clauses, the Green Deal and
the just transition are merely empty slogans. However, such European and
national deals must also address the growing mobility (or transport) poverty
created by upmarket drift. Otherwise, the gilet s jaunes who have, so far, been
a French exception could become a European norm.
Is Europe on track towards net zero mobility?
35WP 2024. 07
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38 WP 2024. 07
Annex
Real drive and lifecycle calculation methodology
To calculate the real drive emissions of the dierent groups of brands, the
following methodology has been used.
Data was extracted from the European Energy Agency database for all new
cars sold between 2019 and 2021 for each of the brands. For each brand,
the average new car sold is calculated by type of fuel while the data is then
aggregated to calculate the average car sold by brand group. For 2019 and
2020 (when NEDC data were available), optimisation rates were applied by
type of fuel and brand group on the NEDC CO₂/km values reported in the
EEA database. To calculate the dierent optimisation rates, the following
literature was relied on (T&E 2018; Tietge et al. 2019; Dorno et al. 2020;
Krajinska 2023). For 2021, the ratio between the WLTP and RD values from
2020 was calculated and applied to the 2021 WLTP values. For BEVs, the WLTP
Wh/km gure was used to calculate the grammes of CO₂/km emitted based
on the average carbon content of European energ y (EU27) for 2019, 2020 and
2021, applying an optimisation rate of 19% based on Sprintmonitor. de data
(see also literature above). The RD emissions of PHEVs only include petrol
and diesel emissions, and not the energy-related emissions from electric use.
To calculate the lifecycle emissions of the dierent brand groups by
type of vehicle, the following methodology was used. In the Climobil
(https:// climobil.connecting-project.lu/) database a car model was selected
for each year for each brand group whose features (mass and engine power)
matched as closely as possible the average vehicle sold within each type of
fuel by the most sold brand in our database for each year. In the Climobil
tool, the following parameters were then adjusted for each model using
Ger pisa/CNRS calculations of the average values for each type of vehicle and
the yearly EU average for the carbon content of the electricity mix: battery
capacity (kWh); electric car range (km); carbon content electricity mix
(grammes CO₂eq./ kWh); NEDC penalt y (per cent); ICE car curb weight (kg);
and electric car curb weight (kg). We also set km/year to 11,000, a total
lifecycle to 200,000 km, and the decade decarbonisation rate of the EU
energy mix to 20%. The results displayed in Figure 6 are calculated with the
methodology and parameters of the Climobil tool.
D/2024/10.574/12
ISSN: 1994-4446 (print version)
ISSN: 1994-4454 (electronic version)
European
Trade Union Institute
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