CRU: New EU Auto Emissions Targets and Their Impact on Steel Demand

LONDON, Jan. 16, 2020 /PRNewswire/ -- As of 1st January 2020, new tighter CO2 emissions limits came into force for new cars sold in the EU. It appears that the existing pattern of EU car sales does not meet the new requirements and for some OEMs the gap to compliance may be large. On balance we think that this situation presents a net negative to the demand outlook for steel from the EU automotive sector in 2020, relative to its current pattern.

The situation: the new target will be a stretch to achieve

The new target is EU fleet-wide average emissions of 95g CO2/km for new. A target of 130g CO2/km has been in force since 2015 and has been achieved and surpassed, however the 27% tightening of the target for 2020 looks to be a stretch goal relative to recent actual emissions:

Detail around the target means that in 2020 it is to some extent "soft" – full implementation of the target on all new EU car sales is scheduled for 2021 but has a phase-in this year meaning that it is applicable only to the lowest-emitting 95% of sales. The target is also manufacturer-specific and adjusted for the average mass of vehicles sold. This means that manufacturers of on-average heavier cars have a higher target.

Other refinements include a "super credits" system that allows each 2020 sale of a vehicle emitting less than 50g CO2/km to count as two vehicles in the calculation of a manufacturer's overall average. This system will be tapered out over 2021 and 2022. Credits against emissions can also be granted where vehicles are sold equipped with "innovative technologies" that allow emissions to be reduced. Currently-approved such technologies include LED lights, an engine idle coasting function and a battery charging photovoltaic roof.

The penalty for non-compliance with the 95g target is a severe financial one. In the event that a manufacturer's average fleet emissions exceed the target, the penalty payment will be €95 per g CO2 over the target, per car registered by the manufacturer in the EU in the year.

Read the full story:
https://www.crugroup.com/knowledge-and-insights/insights/2020/new-eu-auto-emissions-targets-and-their-impact-on-steel-demand/ 

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