The European Automobile Manufacturers’ Association (ACEA) recently published an insightful report on the CO2 emissions of European trucks. The report covers vehicles manufactured in the second half of 2019 with CO2 emissions certified using the new simulation-based method called VECTO. Although this sounds like an oddly specific and small sample of data, these values are quite a big deal.
Last year, the European Union adopted its first-ever CO2 standards for trucks, which mandate a fleet-wide reduction of 15% in 2025 and 30% in 2030 relative to a fixed, yet currently unknown, baseline. This baseline will be defined by the CO2 emissions of VECTO-certified trucks registered in the second half of 2019 and the first half of 2020. This approach for defining a baseline does raise some concerns.
Let’s start with the elephant in the room: An inflated CO2 baseline would reduce the burden on manufacturers to meet the CO2 standards. This creates a perverse incentive for manufacturers to influence the baseline, a strategy that is not unheard of. So, let us examine more closely the incentives and mechanisms for truck manufacturers to report inflated CO2 values.
First, let’s examine the incentives. Manufacturers are quick to point out that a deliberate increase in reported CO2 emissions to inflate the baseline would be counterproductive, as it could hamper a manufacturer’s position in the competitive European market. To contest this simplistic reasoning, one does not need to imagine the idea of anti-competitive practices. The €3.8 billion fine in the recent truck cartel case ought to have set manufacturers straight.
Taking actions to inflate the baseline could be an economically rational decision, as it could enable lower compliance efforts without the risk of heavy fines. The figure below shows the compliance performance of a hypothetical manufacturer declaring its real CO2 emissions (left) and reporting inflated values (right) during the baselining period. The black dot in the vertical axis is the baseline value determined from the reported CO2 emissions from all manufacturers. The red step line represents the manufacturer’s fleet CO2 emissions, assuming a linear reduction from year to year. While the CO2 target is enforced from 2025 onwards, manufacturers can accumulate early credits from 2019 to 2024. The black step line represents the threshold for the accumulation of those early-credits (see here for more details on the credit/debt system). The green blocks represent the credits accrued by the manufacturer, and the red blocks represent the debt accrued in 2025.
Please click here to view the full press release.
SOURCE: ICCT
