·Annual number of notifications received from Member States for barriers of internal EU trade of cars, vans, lorries/buses caused by technical prescriptions imposed by national, regional or local authorities (i.e. bans of any kind) under the notification procedure of Directive 2015/1535.

·Annual share of road transport to the pollutant emissions of certain pollutants as reported by the Member States to the EEA under the NECD.

·Annual development of impacts of air pollution on health (i.e. premature deaths related to exposure of certain pollutants) as included in the annual report on air quality in Europe.

·Annual pollutant concentration levels in Europe’s urban areas and annual share of road transport to the pollutant emissions as reported by the Member States to the EEA under the National Emission reduction Commitments Directive (NECD)28 and included in the annual report on air quality in Europe1.

The Euro 6/VI evaluation identified as lesson learnt the lack of monitoring indicators in the Euro 6/VI emission standards83. Arrangements should be made to monitor and evaluate the effectiveness of Euro 7 emission standards against operational objectives and to establish causality between the observed outcomes and the legislation. For this purpose, a number of monitoring indicators are proposed for the review of Euro 7 emission standards planned with the mid-term evaluation of the ‘fit-for-55’ initiatives.

Automotive industry also raised concerns regarding competitiveness in view of the investments that need be focussed on the climate ambition of the European Green Deal, in particular in view of the proposed end-date for combustion-engine cars and vans. The investment challenge for the automotive sector to reach the climate and zero-pollution ambition was already recognised in the European Green Deal. The impact assessment shows that the investment attributable to PO3a is not high. With the end-date of combustion-engine cars/vans by 2035, the cumulative annual investment of PO3a and CO2 emission standards amounts to €20.2 billion, out of which €19 billion is due to the proposed CO2 target and €1.2 billion due to PO3a. Furthermore, the analysis of the cumulative CO2 and PO3a investments also shows that there are benefits for the competitiveness of the automotive industry for zero- and low-emission technologies which will both be more and more demanded on the global market.

The main consumer organisation and some automotive manufacturer and Member States estimated in the targeted stakeholder consultation that even though more stringent pollutant limits will have an impact on the vehicle price, it will also make battery electric vehicles even more competitive. This potential accelerated shift to electric vehicles by medium-ambitious Euro 7 has been taken into account in the modelling of the CO2 impact assessment for cars and vans32 by common econometric modelling of the projected vehicle fleet (see Figure 7 ) and looking into the net benefits for high CO2 target level taking into account other policies including stricter PO3a pollutant limits (see Annex 4, Figure 14 and 15).

During the consultation activities, stakeholders from Member States, component suppliers, civil society and citizens expressed their support for including the completely new continuous emission monitoring, as considered in PO3a, as an important action to measure real world emissions and to guarantee transparency and protection from tampering. Concern of making pollutant data from vehicles available was not raised by consumer organisations or citizens in the stakeholder consultations. These findings illustrate that new continuous emission monitoring is generally found to be socially acceptable. However, vehicle manufacturers were more reluctant on the matter, primarily indicating the need for independent technology and equipment for continuous emission monitoring to prevent high costs and risk for their international competitiveness. Still, the results of the cost analysis in section 6.3.1 illustrate that the cost for available sensor technology is counterbalanced by higher costs savings due to the expected simplified type-approval.

From the stakeholder consultations, there is a pressure from environmental and consumer organisations and some Member States to set more ambitious requirements as in PO3a and PO2b to support further improvement in air quality and thus contribute to protecting public health and the environment. However, automotive industry has raised strong concerns in the stakeholder consultations regarding the technological potential for reducing emissions as proposed in PO2b. In particular, the question if the NOx emission limits for cars could be reduced to a value lower than 30 mg/km and if high ambitious real-driving testing boundaries (“free driving”) should be introduced led to high stakeholder interest in Euro 7. Manufacturers’ concerns have been taken into account in the design of the policy options by differentiation of emission limits, real-driving testing boundaries and durability requirements and extensively discussed in AGVES meetings. In fact the proportionality assessment agrees with some of the concerns, such as the marginal gains of going to values lower than 30 mg/km for NOx proposed in PO3a and that boundaries of testing need to be reasonable leading to PO2b being disproportionate for cars/vans.

·PO3a is expected to introduce effective continuous emission monitoring which is likely to become a primary testing method for checking the environmental compliance of vehicles. As such, it would help modernising inspection procedures to periodically control the actual emission performance of vehicles under the Roadworthiness Directives, which would allow to fix high emitting vehicles earlier and avoid tampering of vehicles. This is expected to lead to significant cost savings and health and environmental benefits that were not taken into consideration in this impact assessment. If option PO3a were not to be retained, the possibilities for the revision of the Roadworthiness Directives will be significantly limited.

·Continuous emission monitoring introduced by PO3a would also be beneficial as monitoring indicator for a mid-term evaluation under the European Green Deal. The air pollution modelling tools used in this impact assessment could move from limited test data to real world data.

·PO3a would offer the possibility of geo-fencing which would support Member States and cities improving air quality in densely populated areas. This technology puts a plug-in hybrid electric vehicle automatically into zero-emission mode when entering zero-emission zones, such as cities. This would allow for the development of new business models using the emission information collected to support the concept of Smart Cities in the EU.

·PO3a is expected to achieve the highest administrative, testing and type-approval cost savings, as continuous emission monitoring equipment is expected to facilitate the granting of type-approval and the verification testing procedures, which almost balance the additional equipment costs. These cost savings are higher for light- than for heavy-duty vehicles.

In addition, PO3a ensures highest coherence with the European Green Deal and the current and planned revision of the Roadworthiness Directives. It adds digital ambition to PO2a through introducing continuous emission monitoring in line with the twin green and digital transformation aimed at by the European Green Deal. While having the same net benefits, PO3a goes significantly beyond PO2a by adding the advantages of continuous emission monitoring. These advantages are valid for light- and heavy-duty vehicles:

PO3a is found to be to be most coherent with other EU policies. It is coherent with the air quality legislation and CO2 emission standards. PO3a ensures a cost-efficient reduction of all relevant air pollutant emissions from light- and heavy-duty vehicles, supporting Member States in meeting their emission reduction commitments under the National Emission reduction Commitments Directive and contributing complementary to reach the GHG reduction objectives of the EU. The cumulative impacts with CO2 emission standards on industry and citizens in terms of investments needs and consumer affordability are expected not too high.

PO3a is likely to have additional qualitative efficiency benefits for all vehicles exceeding those in PO2a: some positive impacts on competitiveness by improving for industry access to international key markets and innovation, on the single market by possibly preventing Member States from taking unilateral decisions to address excessive emissions from road transport, on consumer trust by providing reliable information on emission performance of vehicles and on employment and re- and up-skilling of workforces.

Nevertheless, also acting for cars/vans is essential for achieving the green ambition of the European Green Deal, Zero Pollution Action Plan and new EU Urban Mobility Framework to make transport drastically less polluting, especially in cities. These net benefits cannot be ignored or assessed less relevant, since the PO3a technologies are available for the cars/vans segment and the necessary investments of €300 per car/van can be recouped until 2035. In addition, sensors for vehicles are designed for application in all vehicles. With great numbers of combustion cars/vans still being brought on the market until 2035, introducing PO3a for all vehicles will allow for economies scale from which the heavy-duty segment will still be able to profit, even after 2035.

PO3a is cost-efficient by reaching, as PO2a, highest health and environmental benefits for citizens at lowest total regulatory costs for industry and would lead to less than 1% vehicle price increase for small petrol cars/vans. Despite the proposed end-date of 2035 for combustion-engine cars/vans, PO3a is estimated to lead for cars/vans to sufficient net benefits in average of €25 billion and for lorries/buses to very high net benefits in average of €117 billion (see quantitative efficiency assessment in Table 13 ). This difference between light- and heavy-duty vehicles can be explained by the higher margin for emission reductions possible for lorries/buses.

PO3a is most effective in achieving all defined objectives, for light- and heavy-duty vehicles. It provides up-to-date limits for all relevant air pollutants and is most suitable to reduce complexity of the current Euro 6/VI emission standards and to improve comprehensively control of real-world emissions by introducing continuous emission monitoring and extending the durability requirements to the average lifetime of the vehicle.

Although PO3a and PO2a have about the same average net benefit as well as different net benefits for cars/vans and lorries/buses (about €25 billion in PO3a and PO2a for cars/vans, about €117 billion in PO3a and PO2a for lorries/buses), there are further qualitative benefits of PO3a in terms of effectiveness, efficiency and coherence leading to the overall conclusion that PO3a is most proportionate for both vehicle segments. Moreover, there is a clear need to act in both vehicle segments to improve our health and well-being.

In addition, the assessment of an alternative set of medium-ambitious durability requirements in Annex 8 (summarized in section 7.2) has shown no important change in efficiency compared with PO3a, while the alternative set of medium-ambitious pollutant emission limits has illustrated slightly lower efficiency.

The overall proportionality assessment of the effectiveness, efficiency and coherence of each of the options has demonstrated in section 7.4 that the policy options can be narrowed down to preferred medium-ambitious PO3a, for light- and heavy-duty vehicles. PO3a comprises simplification measures, medium ambitious pollutant emission limits, real-driving testing conditions and durability provisions and introduction of continuous emission monitoring with available sensors for all vehicles. All arguments below are equally valid for light- and heavy-duty vehicles.

In summary, PO1 is considered a rather disproportionate policy option, for light- and heavy-duty vehicles. PO2a and PO3a are both considered as proportionate, for light- and heavy-duty vehicles. The additional effectiveness, efficiency and coherence of PO3a over PO2a, for light- and heavy-duty vehicles, is mainly due to its positive impact on competitiveness through the introduction of continuous emission monitoring and its additional coherence with the green and digital ambitions of the European Green Deal and the Roadworthiness Directives. This makes PO3a the most proportionate policy option. PO2b, on the other hand, is considered disproportionate for light-duty vehicles due to the not efficient net benefits and less proportionate than PO2a and PO3a for heavy-duty vehicles due to the lower net benefits and some negative impact on affordability for SME users.

Considering the above, the medium intensity and ambition level of PO3a, adding digital to the green ambition compared to PO2a, are found to match in the best manner the identified problems and objectives for cars/vans and even more so lorries/buses, for which there is a higher margin for emission reductions. Hence, PO3a is clearly found to be a proportionate option.

In addition, continuous emission monitoring in PO3a would allow for an ambitious revision of the Roadworthiness Directives in which a modernisation of inspection procedures to control emissions from vehicles periodically can be put forward. Although out of the scope of this impact assessment, this modernisation in inspections will likely lead to additional cost savings for the competent authorities by reducing the time needed to perform inspections. Such indirect positive impacts will likely also be felt by vehicle owners.

When it comes to coherence with the CO2 emission standards, PO3a is expected to achieve similar results as PO2a, while the relevant cumulative impacts with CO2 emission standards on industry and citizens are expected not too high.

Overall, PO3a is found to be most coherent with other EU policies. When it comes to coherence with the air quality policies, PO3a is expected to achieve similar results as PO2a. In the context of geo-fencing, new business models using the information collected in PO3a can be developed to support the concept of Smart Cities in the EU and therefore benefit further air quality. PO3a allows for improvements over PO2a in the coherence with the green and digital ambitions of the European Green Deal through the introduction of continuous emission monitoring which contributes to the digital transformation.

While PO3a surpasses PO2a when it comes to effectiveness, for efficiency the options achieve similar results. When focussing solely on the quantifiable costs and benefits, PO3a scores sufficiently for cars/vans as it achieves net benefits that are equal to those estimated in PO2a. Also for lorries/buses, PO3a is found to be clearly efficient with high net benefits in the ranges of PO2a. Still, PO3a is likely to have additional qualitative benefits for all vehicles exceeding those in PO2a: a more positive impact on competitiveness (see above) and additionally on free movement within the single market, consumer trust and employment/skills (see Table 9 for light-duty vehicles / Table 10 for heavy-duty vehicles).

At an only slightly higher regulatory cost for industry than in PO2a through increased equipment costs for all vehicles following the introduction of continuous emission monitoring, PO3a is set out to achieve slightly higher health and environmental benefits for citizens. In PO3a, high emitting vehicles are expected to be fixed earlier, while tampering of vehicles should be avoided. Moreover, the additional regulatory costs are for a large part outweighed by the additional regulatory cost savings expected in PO3a over PO1, PO2a and PO2b during the implementation phase and administrative costs. While PO3a leads to similar low negative impacts on affordability for consumers and SMEs as PO2a, it is set out to outweigh the other options when it comes to positive effects on competitiveness by improving for industry access to international key markets and innovation. In particular, the development of sensors and digital communication systems creates market opportunities, some of them beyond the automotive supply-chain. The use of best available sensors supports access to international key markets, in particular to United States and China where similar developments are taking place.

While PO3a is as effective as PO2a when it comes to the second specific objective of providing up-to-date limits for all relevant air pollutants, PO3a is found to be the most effective for achieving the other specific objectives. PO3a is most suitable to reduce complexity through continuous emission monitoring. In particular, continuous emission monitoring equipment is expected to simplify the reporting and other information provision obligations for granting of type-approval and ease the verification testing procedures. Subsequently, PO3a achieves the highest cost savings during the implementation phase and administrative costs not only for lorries/buses, but also for cars/vans. In addition, PO3a is also expected to achieve simplifications in the implementation of interlinked Roadworthiness Directive (see below). Also when it comes the third specific objective, PO3a is found to be the most effective to improve control of real-world emissions for all vehicles, even in view of the end-date of 2035 for combustion-engine cars/vans.

The high intensity and ambition level of PO2b are still found to match the identified problems and objectives for lorries/buses (at lower extent than PO2a and PO3a), but this cannot be said about PO2b for cars/vans. PO2b for cars/vans is considered disproportionate due to the not sufficient net benefits. PO2b for lorries/buses is considered less proportionate than PO2a and PO3a due to the lower net benefits and some negative impact on affordability for SME users.

Still, PO2b is expected to be overall the most successful is improving coherence with the green ambition of the European Green Deal, the air quality policies and the CO2 emission standards, especially for lorries/buses, as it has the highest ambition towards sustainable mobility. However, the cumulative impacts with CO2 emission standards on industry and citizens in terms of investments needs and consumer affordability are expected high. PO2b also improves coherence with Roadworthiness Directives to the same extent as in PO1 and PO2a.

In contrast to PO2a, for PO2b cars/vans the regulatory costs are estimated in the same range as its benefits due to the still high costs for brake filters. For this reason, this policy option is measured to lack efficiency as illustrated by the insufficient net benefits in Table 13 . For lorries/buses, the observation is different with PO2b still achieving high net benefits which are however estimated at a lower level than in PO2a and PO3a.

While PO2b is similarly effective in achieving the objectives as PO2a, it does so at significantly higher cost leading to a higher negative impact for industry compared to PO2a, especially for cars/vans. Subsequently, a medium negative impact on consumer affordability is expected for cars/vans and on affordability for SME users for lorries/buses. Still, PO2b is considered for the cars/vans as well as the lorries/buses segments as most effective regarding the second specific objective of providing up-to-date limits for all relevant air pollutants. While achieving the same regulatory cost savings for industry as PO1 and PO2a due to same simplification measures, PO2b does achieve a higher health and environmental benefits for citizens than both for cars/vans due to the reduction of harmful particles emission from brakes. For lorries/buses, however, these benefits are of the same magnitude as in PO2a. For all vehicles, PO2b would enable a low positive impact on competitiveness by maintaining for industry access to international key markets such as PO2a.

Considering the above, the medium intensity and ambition level of PO2a are found to match the identified problems and objectives for cars/vans and even more so lorries/buses, for which there is a higher margin for emission reductions. Hence, PO2a is considered a proportionate option, especially in comparison to PO1.

In addition, PO2a improves coherence with other EU policies to a certain extent. It improves coherence with the green ambition of the European Green Deal, the air quality policies, and the CO2 emission standards, especially for lorries/buses, as it contributes complementary to reach the green and climate ambition of the European Green Deal and the shift to sustainable mobility. The cumulative impacts with CO2 emission standards on industry and citizens in terms of investments needs and consumer affordability are expected not too high. PO2a also improves coherence with Roadworthiness Directives to the same extent as in PO1.

In contrast to PO1, PO2a is estimated to lead for cars/vans to sufficient net benefits and for lorries/buses to very high net benefits. This difference can be explained by the higher margin for emission reductions possible in HDV. Hence, PO2a is considered an efficient policy option. The assessment of an alternative set of medium-ambitious durability requirements has shown no important change in efficiency for PO2a, while the alternative set of medium-ambitious emission limits has illustrated slightly lower efficiency (see 7.2).

Where PO1 scores poorly on effectiveness, efficiency and coherence, PO2a scores significantly better on all aspects. In PO2a the higher pressure on regulatory costs for industry is expected to have a moderately negative impact for cars/vans and low negative impact for lorries/buses. Subsequently, a low negative impact on consumer affordability is expected for cars/vans and on affordability for SME users for lorries/buses. Nevertheless, PO2a is more effective in achieving the defined objectives. Since it includes the same simplification measures as PO1, it is equally successful towards the specific objective of reducing complexity. Next to that, PO2a goes significantly beyond PO1 when it comes to the second specific objective of providing up-to-date limits for all relevant air pollutants with only PO2b being more effective. Also for the third specific objective, PO2a goes further than PO1 by extending the durability to the average lifetime of the vehicle and covering medium ambitious real-driving testing conditions. That way, PO2a would lead to the same regulatory cost savings for industry as PO1, while adding medium positive health and environmental benefits for citizens in case of cars/vans and even high positive health and environmental benefits in case of lorries/buses. In addition, PO2a would enable a low positive impact on competitiveness by maintaining for industry access to international key markets.

Considering the above, the low intensity and ambition level of PO1 are not found to match the identified problems and objectives for cars/vans and even less so for lorries/buses, for which the share of new zero- and low-emission vehicles in the fleet is projected to increase at a slower pace. Therefore, PO1 is considered a rather disproportionate policy option.

In addition, the policy option does not improve coherence with the green and digital ambition of the European Green Deal or with other main EU rules tackling air pollutants in the road transport sector (air quality legislation and CO2 emission standards). Still, some improvements on the coherence with Roadworthiness Directives are expected in PO1.

The low net benefits in PO1, especially for lorries/buses, point towards an overall low efficiency compared to other options. This indicates that this option is significantly less worthwhile as a whole than the other options.

The results from the previous sections illustrate that while PO1 is the least costly for industry, both for cars/vans and lorries/buses, it is simultaneously the least effective in achieving the objectives. PO1 is only expected to achieve significant success towards the first specific objective of reducing complexity of the current Euro emission standards. In particular, the simplification measures introduced in PO1 and continued throughout the other options lead to moderately positive regulatory cost savings for industry (covering costs for testing, witnessing of tests by type-approval authorities and type-approval fees as well as administrative costs for reporting and other information obligations as part of the type-approval procedures). Since PO1 is considered to be not more effective than the baseline in updating obsolete emission limits and only slightly more effective in improving control of real-world emissions, PO1 would only lead to minimal health and environmental benefits for citizens.

The Roadworthiness Directives aim at detecting over-polluting light- and heavy-duty vehicles due to potential technical defects by means of periodic testing and inspections and roadside inspections. All policy options contain elements to support this objective, with PO3a introducing effective continuous emission monitoring mechanisms and contributing the most. Significant further cost savings are expected for PO3a in the cars/vans as well as lorries/buses segments due to such more effective continuous emission monitoring mechanisms. Such mechanisms could gradually become a primary tool in the Roadworthiness Directives, modernise the current inspection procedures and lead to lower administrative costs. While this cumulative impact could not be quantified yet in this impact assessment, it shall be part of the upcoming revision of the Roadworthiness Directives.

The cumulative investment challenge for the automotive sector to reach the climate and zero-pollution ambition was already recognised in the European Green Deal, which stated that “Delivering additional reductions in emissions is a challenge. It will require massive public investment and increased efforts to direct private capital towards climate and environmental action, while avoiding lock-in into unsustainable practices. […] This upfront investment is also an opportunity to put Europe firmly on a new path of sustainable and inclusive growth. The European Green Deal will accelerate and underpin the transition needed in all sectors.” Clear regulatory signals to the automotive sector are considered crucial for delivering climate and zero-pollution investment decisions. As shown in section 7.1, the cumulative investment attributable to PO2a and PO3a are considered not too high, while the investment attributable to PO2b is considered high. As the regulatory costs are expected to be passed on to consumers, the assessment of the cumulative consumer affordability comes to the same result.

Whereas the CO2 emission standards promote zero-emission technologies, such as electric vehicles, the new Euro 7 standards address the emission of harmful air pollutants from combustion engines, brakes and, in the future, tyres with the aim to protect human health and the environment. Therefore the Euro 7 general objectives remain valid insofar as the important share of ICE vehicles will continue to emit exhaust pollutants, and all vehicles will contribute to non-exhaust emissions irrespectively of the engine. Despite proposed end-date of 2035 for new combustion-engine cars/vans, the number of vehicles placed on the market with combustion engines (including hybrids) remain important, in particular for lorries/buses. Both CO2 emission and Euro pollutant standards are considered as complementary to reach the climate and zero-pollution ambition of the European Green Deal and contribute to the shift to sustainable mobility. All policy options are in principle coherent with this approach, but PO1 to a rather limited extent, given the lower expected pollutant emission reductions.

That way, the new Euro 7 standards can be considered as key element to deliver on a zero-pollution ambition as set out by the Communication on the European Green Deal and to contribute to the objectives of the EU’s clean air policy, including the planned revision of the Ambient Air Quality Directives (AAQD) and the existing National Emission reduction Commitments Directive (NECD). The commitment in the European Green Deal to ''revise air quality standards to align them more closely with the World Health Organization recommendations'' supports a high degree of ambition in source legislation such as Euro 7. By ensuring a reduction of all relevant air pollutant emissions from road transport consistent with AAQD/NECD air pollutant coverage and targets, the Euro 7 standards notably support Member States in meeting their commitments under the NECD. This is made in a similar way as the CO2 emission standards support Member States in meeting their CO2 targets under the Effort Sharing Regulation. PO2b with the highest emission reductions, in particular for lorries/buses, offers the highest level of coherence with air quality policies, closely followed by PO2a and PO3a. The cumulative impact with the planned revision of the AAQD in 2022 cannot be calculated in this impact assessment but is estimated limited.

Transport should become drastically less polluting, especially in cities and Euro 7 is considered as a vital part of the transition towards zero-emission vehicles on EU roads. PO2b is considered for light-duty vehicles most effective towards zero-emission cars/vans on EU road due to the use of best available emission control technology, closely followed by PO3a using existing emission control and sensor technology. For heavy-duty vehicles, PO3a is considered most effective towards zero-emission lorries/buses on EU road. This difference between the vehicle segments is due to the fact that effective brake filters that have a high benefit can be considered in PO2b for the moment only for cars/vans (no brake emission data available for HDV). This may change in the future, once the brake filters are a more mature technology, and they may also be applied for heavy-duty applications. Moreover, NOx emissions are already at such a very low average emission level in PO2a that further amelioration due to stricter emission levels or continuous emission monitoring have also a very low effect on emissions. Synergies should be looked for between the twin green and digital transformation, as encouraged by the European Green Deal and the New Industrial Strategy. Indeed, digital ambition by introducing continuous emission monitoring and vehicle connectivity in PO3a can ensure the reduction of emission over vehicles’ lifetimes.

Since the emission limits and durability assumptions are the same in PO2a and PO3a, for light-and heavy-duty vehicles, the conclusions drawn are also valid for PO3a.

The assessment has been carried out, based on two scenarios for each type of vehicle: one scenario assumes slightly higher (i.e. less ambitious) emission limits when compared to the medium ambition emission limits in PO2a (see Table 56 in Annex 8). Another scenario assumes increased durability by extending the durability from the average to the full lifetime of light- and heavy-duty vehicles. The alternative assumption on emission limits leads to lower emission savings when compared with PO2a, but it still results in the same regulatory costs (see Table 59 in Annex 8). The alternative assumption on durability results in slightly higher health and environmental benefits, while also increasing hardware costs lead to slightly higher regulatory costs (see Table 60 in Annex 8). In conclusion, the net benefits of the alternative set of assumptions are, in case of durability requirements, the same or, in case of emission limits, just slightly worse than PO2a, while remaining overall largely positive. This conclusion is valid for light- and heavy-duty vehicles.

In the stakeholder consultations, automotive industry and civil society representatives raised concerns, often having diverging opinions, regarding the level of emission limits, length of durability requirements and the technological potential for reducing emissions over the lifetime of the vehicles. In addition to the different emission limits and durability assumed in the examined policy options an alternative set of assumptions was assessed to address remaining uncertainty around the medium green ambition on emission limits and durability in PO2a. It allows in particular to test the sensitivity of the environmental gains to the choice of the emissions limits, and the respective costs and benefits of increasing the durability of the measures.

To further analyse PO2a and PO3a having about the same average net benefit as well as different net benefits in the cars/vans and lorries/buses segment, qualitative elements of the effectiveness, efficiency and coherence analysis will be taken into account in the proportionality analysis (see 7.4).

For all vehicles, PO1 offers only low net benefits, compared to other options. Although PO1 is estimated to lead to significantly lower regulatory costs due to minimal change to the emission limits and testing requirements and cost savings by simplification measures, the health and environmental benefits in terms of emission reductions are however lower than for all other policy options.

For lorries/buses, PO2a and PO3a offer very high net benefits with an average of about €117 billion and a range from €99-€134 billion, while PO2b shows lower relative benefits. The difference in net benefits compared to cars/vans can be explained by the higher emission reduction potential for HDV.

For cars/vans, PO2a and PO3a are estimated to lead to sufficient net benefits among the analysed options with an average of about €25 billion and a range from €22-€28 billion. However, for PO2b, based on more advanced emission control technologies such as brake filters instead of brake pads leading to higher costs, the low net benefits are with the range of €0.87-€1.81 billion considered not sufficient.

As shown in Table 13 , the benefits outweigh the costs in the policy options, except in PO2b for cars/vans in which the benefits equal the costs. For the other policy options, positive results are also expected when considering the medium to high level of confidence of the benefits and cost estimations (see details on uncertainty of the cost-benefit analysis in Annex 4, section 1.3.2.1).

The total regulatory costs in the cars/vans as well as in the lorries/buses segment consist of 1) equipment costs for emission control technologies and the related R&D and calibration costs including facilities and tooling costs, 2) costs during implementation phase for testing, witnessing of tests by type-approval authorities and type-approval fees and 3) administrative costs (reporting and other information obligations as part of the type-approval procedures). In all policy options the increase in total regulatory costs is due to 1) equipment costs, reduced by 2) cost savings during the implementation phase and 3) administrative costs savings both due to simplification measures (see Annex 4, Table 15, 18, 19 and 23). Regulatory cost from 1) is considered as cost; and regulatory costs savings from 2) and 3) are considered as benefit in the efficiency assessment.

The main benefits of the policy options are substantial health and also environmental benefits for citizens due to reduced emissions of harmful air pollutants from cars/vans as well as from lorries/buses. This health and environmental benefit can be monetised using the concept of external costs developed for the Commission’s Handbook on the external costs of transport. It reflects the damage costs by air pollution to health and environment, in particular medical treatment costs, production losses due to illnesses and even deaths. In addition, the benefits reflect impact on the environment by air pollutants such as crop and biodiversity losses as well as material and building damage.

In order to assess the quantitative efficiency of policy options, total regulatory costs are compared to the monetised health and environmental benefits of a reduction of air pollution (as net benefits i.e. the difference between the present value of the benefits and costs). The baseline against which the policy options are assessed until 2050 considers that fleet renewal would lead to a higher share of Euro 6/VI vehicles in the vehicles mix, an end-date of combustion-engine cars/vans in 2035 and a decrease of combustion-engine lorries/buses in line with the projected HDV fleets (see 5.1).

Since the policy options are based in general on existing technologies not requiring a sector transformation, the contribution to the cumulative impact on employment with the CO2 emission standards is not significant. While the CO2 emission standards for cars/vans are expected to result in the number of jobs increasing by 39 000 in 2030 and even by 588 000 in 2040, the low positive impact of PO2b and PO3a could indicatively still lead to an additional increase of about 15 thousand and 9 thousand jobs in 2030 in the cars/vans segment. About half of the vehicle manufacturers also claimed that employment in businesses focused on traditional combustion-engines would be negatively affected. This employment effect due to the shift to electric vehicles has been taken into account in these cumulative impacts.

The introduction of stricter emission limits and continuous emission monitoring (PO2b, PO3a) is expected to have for cars/vans as well as lorries/buses a low positive impact on employment and re- and up-skilling of workforces.

All policy options are expected to have positive impacts on consumer trust, as they improve vehicles’ environmental impact. The impact is expected to be most extensive for all vehicles in PO3a which enables sharing more and reliable information on emission performance of vehicles to consumers through continuous emission monitoring.

When looking into the cumulative consumer affordability with the proposed CO2 emission standards for cars/vans, the concept of total cost of ownership (TCO)-first user has to be used. Since fuel and electricity savings from the use of zero-emission vehicles are significant for consumers, the CO2 emission standards decrease the total cost of ownership (TCO) of such vehicles. The 1.7-2.3% increase in diesel vehicle prices in PO2a, PO2b and PO3a leads for the consumer to a decrease of the TCO savings in 2030 from €600 per car/van when only the effect of a 100% CO2 target in 2035 is taken into account to €486, €356 and €488 per car/van when additionally the effect of PO2a, PO2b and PO3a are taken into account.

The impact of the new requirements on consumer affordability in the cars/vans segment would be limited. The total regulatory costs compared to baseline are expected to be passed on to consumers, while the impact of the affordability for lorries/buses is explained under the impacts to the industry and SMEs. This leads in PO2 and PO3 in the segment of small petrol cars/vans, which is the most relevant for low-income consumers, to a 0.8-2.2% increase in petrol vehicle prices. While the highest price increase of 2.8% for diesel vehicles in PO2b is above the price increase in the previous Euro standard, the impact on consumers’ affordability will be limited considering that this is no longer the technology of choice for this segment. The impact on the affordability of the second-hand consumers is expected to be even less. This conclusion is in line with the view from a consumer organisation which stated that an appropriate level of ambition can make vehicles significantly cleaner while not making them disproportionately more expensive.

PO2a, PO2b and PO3a offer substantial health and environmental benefits due to reduced emissions of harmful air pollutants (see Table 11 and Table 12 ). The main benefits for citizens are substantial health benefits, expected to result in a reduction of medical treatment costs, production losses due to illnesses and even deaths. Since the emission savings also reflect reduced damage costs on crop and biodiversity losses and material and building damage, i.e. environmental benefits, no policy option is expected to do significant harm to the environmental Sustainable Development Goals. The main driver of the high positive impacts is the reduction of NOx and PM2.5 emissions, while the reduction potential for heavy-duty vehicles is in kilotons twice as high as for light-duty vehicles.

As far as SMEs are concerned, no significant impacts are expected, except of affordability for SME users (e.g. transport or logistics services, vehicle rental or leasing companies, companies using vehicles). Vehicle prices are expected to increase due to additional costs for emission control systems. This effect is expected to be the most pronounced in the smaller vehicle segments with lower average prices. For small cars/vans, a low negative impact on the affordability for SME users is supposed in PO2a and PO3a where total regulatory costs could reach about 2% of the vehicle price. A medium negative impact is assumed in PO2b where the total regulatory costs could reach about 3% of the vehicle price. For small lorries, also a low negative impact is expected in PO2a and PO3a, whereas a medium negative impact is supposed in PO2b.

PO3a and PO2b are considered to have some positive impact on the single market for both vehicle segments. Introduction of the best available emission control technologies and continuous emission monitoring on EU level could prevent Member States from taking unilateral decisions to address excessive emissions from road transport. PO3a offers additionally the possibility of geo-fencing to support Member States and cities in their journey towards improving air quality in densely populated areas. This technology could make it possible to allow a wider range of powertrains in zero-emission zones (i.e. zero-emission enabled PHEVs).

Despite the regulatory costs for industry and cumulative investments with CO2 emission standards, PO2 and PO3 are expected to have some positive effect on competitiveness. PO3a shows for cars/vans as well as lorries/buses the highest positive impacts in terms of access to international key markets and innovation. This is due to new market opportunities stemming from the use of available sensors. The use of best available emission control technologies and sensors in PO3a supports access to international key markets, in particular United States and China. Stimulating twin innovation in zero-emission technologies by proposed CO2 emission standards and in low emission technology by proposed Euro 7 pollutant standards, the competitive position of the EU automotive sector can be improved over the baseline.

Especially automotive industry has raised concerns regarding too high cumulative investments with CO2 emission standards. With the end-date of combustion-engine cars/vans by 2035, the cumulative annual investment of PO2a/PO2b/PO3a and CO2 emission standards32 over 2021-2040 for the whole automotive industry amounts to €20.2/€21.4/€20.2 billion, out of which €19 billion is due to the proposed CO2 target and €1.2/€2.4/€1.2 billion due to PO2a/PO2b/PO3a. The investment attributable to PO2a and PO3a are considered not too high, while the investment attributable to PO2b is considered with 13% high.

In terms of regulatory costs savings (covering substantive compliance costs savings during testing, witnessing of tests by type-approval authorities and type-approval fees as well as administrative costs savings for reporting and other information obligation as part of the type-approval procedures), the assessment indicates for all policy options a reduction compared to baseline in the order of €3.5 to €4.7 billion until 2050 for light-duty vehicles and €0.4 to €0.6 billion for heavy-duty vehicles. This difference is due to the limited number of heavy-duty vehicles sold each year. PO3a shows for all vehicles higher reductions than the other options, as continuous emission monitoring equipment is expected to facilitate the type-approval and testing procedures.

Regulatory costs (covering substantive compliance costs due to equipment costs for emission control technologies and the related R&D and calibration costs including facilities and tooling costs) are assessed to be highest for PO2b, in the order of €67 billion between 2025 and 2050 for light-duty vehicles and €26 billion for heavy-duty vehicles, due to the use of more advanced equipment for emission control (brake filters for cars/vans segment instead of brake pads used in PO2a and PO3a, and advanced tailpipe emission control technology for both vehicle segments). PO1 is the least costly as only limited emission control technologies are introduced for light-duty vehicles and none for heavy-duty vehicles.

Regarding the specific objective to improve control of real-world emissions, the effect of PO1 is rather limited as the RDE testing conditions are only slightly and the durability requirements are not expanded compared to Euro 6/VI. PO2a/PO2b go further by extending the durability to the average/full lifetime of the vehicle and covering medium/high ambitious real-driving testing conditions. However, the additional use of continuous emission monitoring through on-board sensors, in addition to PO2a, leads to the highest effectiveness in PO3a for cars/vans as well as lorries/buses.

Due to the strictest update of existing emission limits and setting of new ones, PO2b is considered for cars/vans as well as lorries/buses as most effective regarding the specific objective to provide up-to-date limits for all relevant air pollutants. PO1 is considered to be not more effective than the baseline as the update of obsolete limits is too limited. PO2a and PO3a are slightly less ambitious than PO2b, but go significantly beyond PO1 for all vehicles.

Concerning the specific objective to reduce complexity of the current Euro emission standards, it is effective that the proposed Euro 7 regulation combines Euro 6 emission standards for cars/vans and Euro VI emission standards for lorries/buses in one single regulation, with simplification measures such as references to relevant UNECE regulations regarding testing procedures, fuel- and technology-neutral limits and the use of a single date of Euro 7 introduction per vehicle segment applied for all cars/vans and lorries/buses respectively in all policy options. For cars/vans as well as lorries/buses, PO3a seems to be most suitable to reduce complexity, as continuous emission monitoring equipment is expected to simplify the reporting and other information provision obligations for granting of type-approval and ease the verification testing procedures.

The policy options address to different degrees the specific objectives of the initiative, without going beyond what is necessary.

Table 9 and Table 10 summarise the assessment of each option against those criteria, differentiated between light- and heavy-duty vehicles and following the impacts assessed in chapter 6. Given that there is no weighing of the impacts, major impacts and the other impacts which have less impact on stakeholders are distinguished.

·Efficiency: the extent to which the benefits can be achieved for a given level of resource/at least cost;

Through continuous emission monitoring, more information regarding the emission performance of vehicles could be made available to consumers. The digital solutions offered in this policy option could positively affect the consumers’ perception of the emission standards and subsequently improve consumer trust in good environmental performance of vehicles. Continuous emission monitoring is expected to help detecting non-compliance and malfunction at an early stage which should lead to vehicles emitting less pollutants over their lifetime. Consumers and the general public get higher assurance that their vehicles continues to be clean during its use. Hence, it is expected that PO3 has an additional positive impact on consumer trust compared to PO2a.

Looking into the cumulative impact with the newly proposed CO2 emission standards for cars/vans32, PO3 is estimated to decrease the net savings in total cost of ownership (TCO)-first user from €600 per vehicle by €112 for cars and by €255 for vans in 2030. See detailed analysis on the cumulative impacts on consumers in Annex 4 section 1.5.2.

The total regulatory costs for industry introduced by PO3 are expected to be passed on to the consumers, at least in the longer term. This is especially important for the segment of small cars/vans which is the most relevant for low-income consumers. For small petrol vehicles, PO3a is expected to lead to vehicle price increases up to 0.8% (see Annex 4, Table 25). The impact on consumer affordability will be low since small diesel vehicles, with an estimated price increase of 2.2%, are no longer the technology of choice for the small vehicle segment. This conclusion is in line with the view from a consumer organisation which stated that an appropriate level of ambition can make vehicles significantly cleaner while not making them disproportionately more expensive.

The contribution of PO3a to the cumulative impact with CO2 emission standards32 on employment is expected to be low, since it is based on existing technologies not requiring a sector transformation. While the CO2 emission standards for cars/vans are expected to result in the number of jobs increasing by 39 000 in 2030 and even by 588 000 in 2040, the low positive impact of PO3a could indicatively lead to an additional increase of about 9 thousand jobs in 2030 in the cars/vans segment. See detailed analysis on the cumulative impacts on employment in Annex 4 section 1.5.3.

Some re- and up-skilling regarding sensor operation and verification may be required for type-approval authorities. In PO3, in-service conformity and market surveillance are expected to be mostly dependent on the verification of on-board monitored emissions of the vehicle model family.

While the automotive industry is already expanding relevant expertise by investing in module integration, software development and semiconductor design, CEM is expected to further encourage demand for connected vehicles with advanced electronic information and communication. Therefore, the industry will need re- and up-skilling in order to bridge the existing knowledge gap between the automotive and ICT sector and contribute to the digital transformation. This will be a key enabler for reaching the Green Deal objectives.

A large share of industry, Member States and civil society stakeholders indicated that a higher-level education and new skills will be required for the majority of the personnel in the entire automotive supply chain to successfully apply the measures in PO3a. Compared to the baseline and the previous policy options, a significant up- and re-skilling of the workforce in the automotive supply chain is expected due to the introduction of CEM.

PO3 is expected to result in a direct positive impact on employment, exceeding the impacts of PO2a, in the supply segment of the industry. CEM would require the most intensive R&D and innovation activity among all options to develop and implement the necessary technologies (e.g. on-board sensors and intelligent vehicle communication protocols). This would apply for cars/vans as well as lorries/buses, since sensors are designed for application in all vehicles, light and heavy-duty ones. In addition, almost half of the suppliers stressed in the targeted consultation that the requirements in PO3 could create new business opportunities and quality jobs in the field of sensor technology.

In PO3, a low positive impact is expected on employment by vehicle manufacturers. The introduction of CEM in addition to stricter emission limits, will require some additional workforce for the manufacturing and R&D for new components in the vehicles’ emission control systems and new specialised IT jobs on data communication. The CEM functionality could simplify and modernise the existing on-board diagnostics.

In PO3a, some additional health and environmental benefits could be realised through the monitoring of NOx and NH3 over the vehicle lifetime (see Annex 6, Table 55). The reduction of NOx emissions for cars/vans until 2050 is expected to result in a health and environmental benefit of €33.5 billion, while for lorries/buses it is expected to result in a benefit of €89.6 billion. Also the emission reductions for NH3 in PO3 result in additional health and environmental benefits beyond PO2, more so for lorries/buses than for cars/vans. These benefits are expected to amount up to €1.5 billion for cars/vans (€60-€50 million more than in PO2a and PO2b) and up to €0.9 billion for lorries/buses.

Table 8 shows the monetised health and environmental benefits for PO3a compared to the baseline. New CEM requirements in a Medium Digital Ambition, in addition to the medium ambition stricter emission limits and extended real-driving testing boundaries in PO2a, are expected to result in additional benefits for nearly all pollutants.

Through the introduction of continuous emission monitoring for NOx and NH3 emissions, some additional emission reductions are expected compared to the introduction of strict emission limits only (PO2a). This is due to improved compliance with emission limits and improved protection against tampering with the emission control systems.

As illustrated for key pollutant NOx in Figure 11 and all pollutants in Annex 4, Table 14, the emission reductions that can be expected in PO3a compared to the baseline are significant, in particular for lorries/buses. Also for cars/vans, very low NOx emission levels are reached in 2040, compared to 2050 in the baseline (see 6.2.2).

As the total regulatory costs related to PO3 are expected to be passed on to SME users, they are mostly concerned about the affordability of vehicles. Similar to PO2a, the total regulatory costs in PO3a amount up to 2.2% for small cars/vans and up to 3.2% for small lorries of the vehicle price (see Annex 4, Table 25). Hence, the introduction of CEM is expected to have medium negative impact on the affordability for SME users.

The CEM requirements could be more difficult and costly to implement for the 35 SME cars/vans manufacturers (see 6.1.1.4). Considering that those SMEs use engines equipped with on-board fuel consumption meters (OBFCM)137 from larger manufacturers, the implementation of available sensor technologies based on the OBFCM communication platform is not expected to be a challenge.

PO3 would significantly improve and simplify compliance of motor vehicles with emission rules and therefore improve the trust on the automotive sector. The possibility to introduce geo-fencing possibilities could allow a wider range of powertrains in zero-emission zones (i.e. zero-emission enabled PHEVs). That way, PO3a could counter the national measures (e.g. zero-emissions zones or phasing-out combustion engines, see section 2.3) and preserve the single market.

Despite the regulatory costs for industry and cumulative investments with CO2 emission standards (see 6.3.1.1), stimulating digital, green and electric innovation would allow the EU automotive sector to maintain access to international markets which would improve its competitive position over the baseline. Since cost for available sensor technology, as assumed in PO3a, is counterbalanced by costs savings due to simplified type-approval (see 6.3.1.1), the investment for PO3a is not higher than for PO2a and not considered too burdensome for vehicle manufacturers.

Lastly, PO3a will also facilitate the implementation of geo-fencing. As a consequence, new business models using the information collected can be developed to support the concept of Smart Cities and to offer new solutions regarding the improvement of air quality.

Similar developments in other key markets in the field of continuous emission monitoring (US with REAL initiative, China with remote on-board diagnostics for heavy-duty vehicles) demonstrate that PO3a could further close the gap between the EU and other countries emission standards.

The introduction of CEM with modern IT functionalities in PO3a is considered as an element of digital innovation in the automotive sector. In addition, the development of sensors and digital communication systems creates opportunities, some of them beyond the automotive supply-chain i.a. in cybersecurity area . European suppliers of communication systems are expected to develop secure protocols for the transmission of information and other IT solution to protect the emission control systems from tampering under PO3 and to facilitate the secure transmission of data. Further synergies with the access to data regulations are also expected, ensuring adequate protection of personal data which are not needed for checking compliance of a vehicle type. It is also worthwhile mentioning that the introduction of CEM is expected to be of high interest for periodic technical inspections and roadside checks of vehicles.

Next to a medium green ambition, PO3a also introduced a medium digital ambition by introducing requirements regarding continuous emission monitoring systems. PO3a is expected to have a moderate positive effect on competitiveness in terms of innovation and access to international markets. Continuous emission monitoring systems are relevant in several third markets for which cleaner ICE vehicles are still needed in view of an expected higher age of the vehicle fleet than the up to 19 years in the EU cars/vans fleet and up to 21 years in the EU lorries/buses fleet.

Since the medium ambition stricter emission limits and real driving testing boundaries of PO2a are also part of PO3a, the arguments relevant for PO2 are also applicable for both vehicle segments in this policy option. While the majority of component suppliers participating in the targeted consultation indicated that continuous emission monitoring in combination with stricter emission limits would positively affect the competitive position of the EU automotive industry, vehicle manufacturers consider it too burdensome.

Table 5 (II.C) in Annex 3 presents an overview of these regulatory costs for manufacturers split up in one-off and recurrent costs linked to the different policy measures, including simplification measures, medium ambition emission limits, real driving testing boundaries and durability and medium ambition continuous emission monitoring.

Especially automotive industry has raised concerns regarding too high cumulative impacts in view of the CO2 investments. With the end-date of combustion-engine cars/vans by 2035, the cumulative annual investment of PO3a and proposed CO2 emission standards32 over 2021-2040 amounts to €20.2 billion, out of which €19 billion is due to the proposed CO2 target and €1.2 billion due to PO3a (see Annex 4, Table 33). The investment attributable to PO3a is considered with 7% increase in annual investments not too high. See detailed analysis on the cumulative impacts on industry in Annex 4 section 1.5.4.

Taking into account the market share of car/van manufacturers in the EU149, over the 25-year period the two largest manufacturing groups, would have to invest between €5.1 and €5.7 billion each in PO3a for the whole period 2025 to 2050. For all other car/van manufacturers, PO3a would only require a total investment between €0.6 and €2.8 billion depending on the size for the whole period. This a small additional amount to the €59 billion each car manufacturer is expected to invest for the shift to automation, connectivity and electrification. 151

Table 7 presents the total regulatory costs in 5-year intervals over the period of implementation of medium ambition emission limits and introduction of available CEM in PO3, including tailpipe, evaporative and brake emissions. It shows that the largest share of the costs occur in the first ten years after 2025. After that, the costs will decrease with a small share of the costs remaining after 2035, mainly resulting from brake emissions requirements for all cars and vans, including zero-emission vehicles, and combustion-engine lorries/buses. They will also be due to the need to continue market surveillance and in-service conformity checks throughout the lifetime to vehicles (i.e. at least for another 10-15 years after the first registration).

For lorries/buses, the administrative cost savings in PO3a amount up to €66 thousand per diesel type-approval (€22 per vehicle) and €67 thousand per petrol type-approval (€47 per vehicle).

In PO3, the administrative burden is further decreased as the new CEM requirements are expected to further simplify the reporting and other information provision obligations146 for granting type-approval and verification procedures through reduced number of type-approvals. This leads to additional cost savings for all vehicle categories. In PO3a, administrative cost savings are estimated at €224 thousand per type-approval (€22 per vehicle) for diesel cars/vans and at €204 thousand per type approval for petrol cars/vans (€26 per vehicle).

For lorries/buses, total regulatory costs are estimated at €2 681 per vehicle in PO3a. Thus, the increase in hardware, R&D and calibration costs linked to the introduction of CEM (€112 per vehicle) is partly offset by the increase in cost savings during implementation phase and administrative costs (€31 per vehicle). The total regulatory costs that came with the introduction of the Euro VI standards for lorries/buses are still found to be in a higher range (€3 717-€4 326 per vehicle).

The total regulatory costs for PO3a, adding medium digital ambition to PO2a by introducing Continuous Emission Monitoring (CEM) based on available sensor technology, are estimated in the range of PO2a. The main reason for this is that the cost for available sensor technology is counterbalanced by higher costs savings due to simplified type-approval using CEM data. This finding should support the buy-in of industry stakeholders who raised concerns that the introduction of continuous emission monitoring in combination with stricter emission limits could be too burdensome for European car manufacturers. For cars/vans, total regulatory costs are estimated €304 per vehicle in PO3a.144 Similar to PO2a, these total regulatory cost estimate is below the total regulatory cost associated with introduction of Euro 6 for diesel cars/vans, but exceeds the costs associated with the introduction of Euro 6 for petrol cars/vans.171 Although PO3a requires the installation of available sensors to allow for CEM, the respective increase in hardware, R&D and calibration costs (€21 per vehicle) is partly cancelled out by reduced costs during implementation phase and administrative costs (€14 per vehicle).

Also the responses to the targeted consultation suggest that stakeholders from all groups, except from vehicle manufacturers, believe that there is potential for a new Euro legislation to further improve consumer trust in emission performance of vehicles and automotive products.

Looking into the cumulative impact with the newly proposed CO2 emission standards for cars/vans32, PO2 is estimated to decrease the net saving in total cost of ownership (TCO) for combustion-engine cars/vans until 2035, but also after this date for zero-emission cars/vans through the proposed brake emission limits. For new cars and vans in 2030, the net TCO savings-first user of €600 achieved through the proposed CO2 targets are expected to decrease by €114 per car and €258 per van in PO2a compared to €244 per car and €364 per van in PO2b. See detailed analysis on the cumulative impacts on consumers in Annex 4 section 1.5.2.

While automotive industry has indicated that more stringent limits would lead to more costly vehicles and a slower fleet turn-over, the expected low impact on consumer affordability in PO2 is more in line with the views of the other stakeholder groups. In the targeted consultation, a consumer organisation stated that the previous Euro standards illustrate that an appropriate level of ambition can make vehicles significantly cleaner while not making them disproportionately more expensive.

The total regulatory costs for industry introduced by PO2 are expected to be passed on to consumers, at least in the longer term. For PO2a and PO2b respectively, this leads in the most relevant segment for low-income consumers, i.e. small cars/vans, to 0.8-2.2% vehicle price increase for petrol vehicles and 2.1-2.8% for diesel vehicles (see Annex 4, Table 22). Impact on consumers’ affordability will be low to moderate since diesel engine, where the additional measures are most expensive, is no longer technology of choice for this segment, especially in PO2a.

The overall contribution of PO2 to the cumulative impact with CO2 emission standards32 on employment is not significant, since the sub-options are based in general on existing technologies not requiring a sector transformation. While the CO2 emission standards for cars/vans are expected to result in the number of jobs increasing by 39 000 in 2030 and even by 588 000 in 2040, the low positive impact of PO2b could indicatively still lead to an additional increase of about 15 thousand jobs in 2030 in the cars/vans segment. On the other hand, PO2a is expected to have a no impact on employment (i.e. also no cumulative employment impact attributable to PO2a). See detailed analysis on the cumulative impacts on employment in Annex 4 chapter 1.5.3.

Similarly, a low to moderate positive impact on skills at vehicle manufacturers and suppliers is expected in PO2 compared to the baseline. Stricter emission limits, new limits for brake emissions and extended coverage of pollutants and real-driving testing will require some re- and up-skilling of the workforce in the automotive supply chain of light- and heavy-duty vehicles to address the related R&D and manufacturing of new components in the vehicles’ emission control systems. This is in line with the targeted consultation where a large share of industry, Member States and civil society stakeholders indicated that a higher-level education (38 out of 66) and new skills (47 out of 66) will be required for the majority of the personnel in the entire automotive supply chain to successfully apply the measures in PO2.174 For type-approval authorities, no significant changes are expected in the required skills set. Stakeholders did not express different views on the cars/vans and lorries/buses segments.

In the targeted consultation, almost half of the component and equipment suppliers stressed that new emission limits will create new business opportunities and quality jobs, particularly in relation to technologies required in the emission control systems, engine optimisation and powertrain hybridisation components.174

In the targeted consultation, automotive industry expressed concerns that stringent emission limits and testing in all driving conditions may accelerate the shift to electric cars. While this possible shift has not been assessed quantitatively (as the model takes as a given the fleet of vehicles as projected in the high target level scenario of the impact assessment on CO2 standards for cars and vans), no compelling reason was found to justify such an accelerated shift due to PO2.174 The main driver to the electro-mobility transition is, and is expected to remain, climate policies. In fact, stricter emission limits and comprehensive real-driving testing are expected to result in small increase of regulatory costs. This increase does not amount to more than 2.1% of the current cars/vans prices in medium ambitious PO2a and 2.8% in the high ambitious PO2b (see Annex 4, Table 22).

A low positive impact on employment at vehicle manufacturers is expected in PO2. Stricter emission limits in both stringency levels and comprehensive real-driving testing will require some additional workforces in the cars/vans as well as the lorries/buses segment due to the related R&D and manufacturing of new components in the vehicles’ emission control systems.

Hence, the impact assessment shows that some of the concerns are justified, such as the marginal gains of PO2b with emission limits lower than 30 mg/km for NOx and high ambitious real-world testing in all driving condition, resulting from high costs and marginal additional health and environmental benefits compared to PO2a.

While the health and environmental benefits related to NOx, NMHC, N2O, CH4 and brake emissions are marginally higher in PO2b, there are no changes for exhaust PM and NH3 as their emission limits remain the same in both sub-options.

In PO2a, the reduction of NOx emissions for cars/vans until 2050 is expected to result in health and environmental benefits of €32.7 billion, while the reduction for lorries/buses is expected to result in benefits of €88.8 billion. For cars/vans, PO2 is also expected to generate health and environmental benefits through a reduction in non-exhaust PM emissions through the inclusion of a new brake emission limit. For all vehicles, PO2 is additionally supposed to result in a reduction of N2O and CH4 emissions, of which health and environmental benefits are monetised as climate change cost163,164.

Table 6 shows the monetised health and environmental benefits for PO2 compared to the baseline. The two different ambition levels for stricter emission limits, extended real-driving testing boundaries and durability requirements have high health and environmental benefits exceeding significantly the low benefit of PO1.

On the other hand, additional reductions are expected for non-exhaust PM2.5 emissions from cars/vans. PO2b includes more stringent limits for brake emissions which require improved brake pads and the installation of brake dust particle filter.

For lorries/buses, the marginal NOx effect is explained by the fact that the testing conditions are already extended in PO2a leading to the major positive effect on the emission performance. The additional reduction of the NOx limit from 150 mg/kWh to 100 mg/kWh in PO2b offers a low total emission reductions.87

For cars/vans, the small difference in emission savings between PO2a and PO2b is explained by the small emissions levels. The only major difference are emissions during cold start, which are more effectively controlled under the stricter emission limits under PO2b, rather than under the medium ones in PO2a.

As illustrated for key pollutant NOx in Figure 10 and for all pollutants in Annex 4, Table 13, the emission reductions compared to the baseline that can be expected by PO2b are significant, in particular for lorries/buses. However, PO2b is expected to lead only to marginal additional emission reductions compared to PO2a for all categories of vehicles (compare Figure 9 and Figure 10 ).

For lorries/buses, the highest emission reductions can be expected under PO2a due to the more stringent air pollutant emission limits for NOx, particles, hydrocarbons, CO, NH3 and N2O emission. NOx emission are assumed to decrease by 0.2 Mt in 2030 to 0.4 Mt in 2050. This high reduction comes from the fact that in the EU fleet a significant number of HDVs, in particular diesel lorries, is still expected to be equipped with a combustion engine vehicle until 2050 (see Figure 7 ).

Additional significant reductions can also be expected due to the stricter air pollutant emission limits and increased durability requirements (see details in Annex 4, section 1.2.3.2). Brake emissions, an example for stricter emission limits, have become increasingly relevant sources of non-exhaust particles and are assumed to go down by 16% in 2030 to 36% in 2050 through the use of improved brake pads.

For cars/vans, NOx emission are expected to decrease significantly and rapidly compared to the baseline, by 21% in 2030, 42% in 2035, 62% in 2040 to 88% in 2050. This significant reduction follows from the introduction of medium ambition extended real-driving testing covering almost all conditions outside the current RDE boundaries and a technology-neutral NOx emission limit of 30 mg/km for cars. This replaces the diverging NOx limits of Euro 6 of 60 mg/km for petrol cars and 80 mg/km for diesel cars. The decrease in Figure 9 illustrates that cars/vans progress more rapidly toward zero-pollution levels (about 0.08 Mt NOx/a) in 2040, compared to similar levels reached in 2050 in the baseline.

As illustrated for key pollutant NOx in Figure 9 and all pollutants in Annex 4, Table 12, the emission reductions compared to the baseline that can be expected by introducing strict emission limits (PO2a) are significant, in particular for lorries/buses. The reduction of emissions for cars/vans is also important, as those vehicles are predominantly used in densely populated urban areas where more citizens are exposed.

The SME users of motor vehicles, such as transport services, etc., are mostly concerned about the effect of new requirements on the price and affordability of vehicles. When fully passed on to SME users, the total regulatory costs in PO2a amount up to 2.1% for small cars/vans and up to 3.1% for small lorries of the vehicle price, and in PO2b up to 2.8% for small cars/vans and up to 4.9% for small lorries (see Annex 4, Table 22). Hence, the strictest emission limits are expected to have medium negative impact on the affordability for SME users.

The new requirements considered in PO2 could potentially be more difficult and costly to implement for the 35 SME cars/vans manufacturers (see 6.1.1.4). Most of those SMEs are specialised in sporty and lightweight cars that are predominantly equipped with petrol engines, whose emission control systems present the lowest total regulatory costs in the vehicle categories. Furthermore, several of these SMEs are supported by the research facilities of larger manufacturers to whom they are linked in the supply chain. In the targeted stakeholder consultation, differing views on the effect of PO2 on SME manufacturers were found. While large manufacturers were pessimistic, suppliers were uncertain or slightly positive considering that SMEs would not be significantly affected in a positive or negative manner by the proposed measures in PO2.174

It is expected that PO2 will increase confidence in vehicles, in particular cars, being clean in all conditions of use and may encourage Member States to reconsider announcements for vehicle bans and local or regional vehicle access limitations, in particular as those have to be notified as potential barriers of internal EU trade of vehicles under Directive 2015/1535. PO2, by increasing confidence in clean vehicles under extended conditions of use and subsequently making Member States reconsider need for unilateral measures, positively affects the functioning of the single market through setting more adequate, future proof rules for vehicles emission. Higher positive impact is expected in PO2b than in PO2a as the former introduces high ambition emission limits and testing boundaries.

However, the assessment also shows that some of the concerns of automotive industry regarding stricter Euro emission standards are justified, such as high investments in the cars/vans segment with emission limits lower than 30 mg/km for NOx and high ambitious real-world testing in all driving conditions in PO2b.

Despite the total regulatory costs for industry and cumulative investments with CO2 emission standards for cars/vans (see 6.2.1.1), PO2a and PO2b are expected to have a low to moderate positive effect on competitiveness in terms of access to international markets and innovation. Stimulating innovation in zero-emission technologies by CO2 emission standards as well as in pollutant emission control technology, access to international markets can be maintained while improving the competitive position of the EU automotive sector over the baseline.

These findings for PO2 are also supported by the majority of component suppliers participating in the targeted consultation, indicating that new emission limits will encourage innovation in the supply-chain and increase the competitiveness of the EU automotive industry on the global stage. Vehicle manufacturers, on the other hand, tend to be more reserved on this point. For the whole mobility ecosystem the effects of PO2 are expected to be positive, given the strong competitive position of EU suppliers of emission control systems.

In addition, over recent years EU export of cars has followed a downwards trend, while import has known a steady increase. In 2019, car exports amounted up to €140 billion, while imports to €63 billion.155 This downward trend is also visible for the export of all motor vehicles, including all light-duty as well as heavy-duty vehicles. In 2019, EU exports of motor vehicles added up to €157 billion and imports to €71 billion. The stricter emission limits for internal combustion engines in PO2 should support EU automotive industry to seize opportunities for further cleaning of internal combustion engines that will still play a role in several third markets for which a slower transition to zero-emission cars/vans is expected, such as in India, South-East Asia, Brazil or South Africa, and in the lorries/buses segment. Choice of PO2 is expected to increase export of EU goods compared to the baseline values, reversing current trends, thus positively affecting the global market share of the EU.154

Through the Euro standards, the EU has traditionally been the global emission standard setter, and the EU automotive industry has traditionally been the technological leader for internal combustion engines. PO2 would put the EU in the forefront of vehicle emission reductions worldwide, overtaking the actual regulatory developments in other key market such as China and the US for tailpipe pollutants except durability (see 6.1.1.2) as well as for new ones that will be there irrespectively of the engine: from brakes and, in the future, from tyres. This would maintain access to international markets.

The views of stakeholders on competitiveness were collected as part of the targeted stakeholder consultation. While Member States and civil society generally expect a positive relationship between stricter standards and competitiveness, differing views were found amongst industry stakeholders with suppliers anticipating positive impacts and manufacturers negative impacts (see Annex 2, Figure 7). Stakeholders did not express different views on the cars/vans and lorries/buses segments.

Table 5 (II.B) in Annex 3 presents an overview of these total regulatory costs for manufacturers split up in one-off and recurrent costs linked to the different policy measures, including simplification measures, medium and high ambition emission limits, real-driving testing boundaries and durability.

Especially automotive industry has raised concerns regarding too high cumulative impacts in view of the CO2 investments and the technological potential for reducing emissions. With the end-date of combustion-engine cars/vans by 2035, the cumulative annual investment of PO2a/PO2b and proposed CO2 emission standards32 over 2021-2040 amounts to €20.2/€21.4 billion, out of which €19 billion is due to the proposed CO2 target and €1.2/€2.4 billion due to PO2a/PO2b (see Annex 4, Table 33). The investment attributable to PO2a is considered with 7% increase in annual investments not too high, while the investment attributable to PO2b is considered with 13% high. See detailed analysis on the cumulative impacts on industry in Annex 4 section 1.5.4.

Taking into account the market share of car/van manufacturers in the EU149, the two largest manufacturing groups, would have to invest between €5.1 and €5.7 billion each in PO2a and between €12 and €13.6 billion in PO2b for the whole period between 2025 and 2050, i.e. over 25 years. For all other car/van manufacturers, PO2a would only require a total investment between €0.5 and €2.7 billion, while PO2b would require a total investment between €0.5 and €6.1 billion for the same period depending on the size of the manufacturer. The investment costs for PO2a can be translated €1.4 billion per manufacturer of lorries/buses while for option 2b the costs increase to €2.1 billion respectively. This is still expected to have a low impact on the estimated investment need for car makers of €59 billion to address automation, connectivity and electrification challenges151, costs are still considered low for the automotive industry in particular those for PO2a.

Table 5 presents the total regulatory costs in 5-year intervals over the period of implementation of stricter emission limits in PO2, including tailpipe, evaporative and brake emissions. It shows that the largest share of the costs occur in the first ten years after 2025. Subsequently, the costs will decrease with a small share of the costs remaining after 2035, mainly resulting from the requirements regarding brake emissions for all cars/vans, including zero-emission vehicles, and combustion-engine lorries/buses. They will also be due to the need to continue market surveillance and in-service conformity checks throughout the lifetime of vehicles (i.e. at least for another 10-15 years after the first registration). For all categories, the five year costs decrease over time as a consequence of the decreasing number of combustion engine vehicles.

Following the same reasoning as in PO1, PO2 is also expected to result in savings in administrative costs. Since PO2 includes the simplification measures introduced in PO1, the administrative costs savings are estimated at the same levels.

For lorries/buses (mainly diesel), in PO2a the cost per vehicle is estimated to increase by €2 601 and in PO2b this cost is estimated to increase by €4 059 for internal combustion engine vehicles. Similar to PO1, the cost savings following the simplification measures (€60 per vehicle) are expected to be exceeded by the hardware, R&D and calibration costs linked to the new limits, testing and durability requirements (€2 661 per vehicle in 2a and €4 119 per vehicle in 2b). For these vehicles, the total regulatory costs are found below the total regulatory costs of the introduction of Euro 6/VI for PO2a and in the range for PO2b.171

Overall, this would result in total regulatory costs for cars/vans of €297 per vehicle in PO2a and of €475 per vehicle in PO2b.144 This cost estimate for cars/vans in PO2a is below the total regulatory costs associated with introduction of Euro 6 for diesel cars/vans, but exceeds the total regulatory costs associated with the introduction of Euro 6 for petrol cars/vans. In case of PO2b, the total regulatory costs per vehicle for cars/vans are in the range of the total regulatory costs of Euro 6 for diesel cars/vans.

For diesel cars and vans, in PO2a regulatory costs linked to the requirements for tailpipe and evaporative emissions are estimated at €399 per vehicle and in PO2b at €463 euro per vehicle. For petrol cars and vans, these costs are expected to be lower estimated at €144 per vehicle in PO2a and at €327 per vehicle in PO2b. In addition, the introduced limits for brake emissions lead to additional hardware costs that differ between combustion-engine and electric vehicles due to differences in technologies and braking patterns. For combustion-engine cars and vans, in PO2a additional regulatory costs linked to the requirements for brake emissions are estimated at €23 per vehicle and in PO2b at €100 per vehicle. For electric cars and vans, these additional regulatory costs are estimated at €13 per vehicle in PO2a and at €60 per vehicle in PO2b.

While the simplification measures lead to cost savings during the implementation phase and administrative cost savings (€41 per vehicle), the new requirements for tailpipe, evaporative and brake emission are expected to result in additional R&D, hardware and calibration costs. The hardware cost per vehicle are calculated using the cost of different technology packages weighted over the development of the fleet in the assessed period. The different technology packages to achieve the requirements of PO2a and PO2b and their costs were verified by stakeholders from automotive industry, civil society and some Member States and are presented in Table 21 in Annex 4.

The total regulatory costs are expected to be higher in PO2 in order to meet medium ambitious emission limits and testing boundaries of PO2a and high ambitious emission limits and testing boundaries of PO2b, compared to PO1. The increase of hardware costs, caused by the new emission control technologies available in the market today, and of some R&D costs for technology system integration and calibration, raises the total regulatory cost compared to the baseline for all vehicle categories. Total regulatory costs per vehicle are higher for lorries/buses than for cars/vans due to the more robust emission control systems required for such vehicles.

While consumer trust was severely affected by Dieselgate in 2015, the last Euro 6d step for cars/vans introducing RDE testing and the changes to the EU type-approval rules with strengthened and independent testing, market surveillance and new enforcement procedures had positive impact on consumer trust. PO1 is expected to have low positive impact on consumer trust. Some positive impact is expected due to introduction of technology-neutral limits, while real-driving testing is slightly enhanced in PO1.

While Euro emission standards are expected to increase costs for consumers, the newly proposed CO2 emission standards for cars/vans32 are expected to decrease the total cost of ownership (TCO)-first user of new cars/vans. This is explained by the fuel and electricity savings that are expected to outweigh the high upfront costs of zero- and low-emission vehicles. In 2030, PO1 is estimated to slightly decrease the net saving in TCO of €600 per vehicle achieved through the proposed CO2 targets by €13 for cars and by €74 for vans. Overall, the net savings in the TCO are still found to be highly positive. See detailed analysis on the cumulative impacts on consumers in Annex 4 section 1.5.2.

It is expected that total regulatory costs following new policy measures for vehicles initially borne by manufacturers are eventually passed on to the consumers, at least in the longer term. It is difficult to establish a clear correlation between regulatory costs and vehicle prices. The Euro 6/VI evaluation could not demonstrate if a price increase of cars since 2014 is associated with regulatory costs stemming from the Euro 6/VI, since the observed increase could also result from other factors affecting prices, e.g. installation of comfort equipment or changes in fleet composition towards more heavy and expensive vehicles.44 However, 121 out of 139 respondents to the public consultation from all stakeholder groups, including citizens, considered that Euro 6/VI has led to an increase in the prices of cars, vans, lorries and buses. The regulatory cost increase could lead in the most relevant segment for low income consumers, i.e. small cars/vans, to 0.1% vehicle price increase for petrol vehicles and 0.5% for diesel vehicles, which is considered not significant. See detailed comparison of total regulatory costs per vehicle segment in Annex 4, Table 17.

Since PO1 does not require new emission control or ICT technologies, no up- or re-skilling should be needed compared to the baseline.

Nevertheless, resources for type-approval and testing services may slightly decrease following the introduction of simplification measures and the expected lower number of emission type-approvals in PO1, and subsequently also policy options 2 and 3.

Almost half of the suppliers in the targeted consultation stressed that new limits will create new business opportunities and quality jobs. Since PO1 only aligns the emission limits for different vehicle technologies, no impact on employment is expected in PO1, neither in the cars/vans nor the lorries/buses segments. Reason for this being that there is no need for new workforce for the continued use of current emission control technologies or to control emission outside the current RDE boundaries.

The Euro 6/VI evaluation found no compelling evidence that emission regulations have a negative effect on employment. On the other hand, Euro 6/VI may positively impact employment through creation of new jobs in R&D domain or those related to production of emission control systems at the suppliers.44

Table 4 shows the monetised health and environmental benefits in PO1 compared to the baseline. Since PO1 considers technology-neutral emission limits and some improvements regarding extended real-driving testing, benefits are only expected to be achieved through reductions of NOx, exhaust PM and NH3 emissions. Through the reduction of NOx emissions from cars/vans, PO1 is expected to result in a €20.6 billion reduction of external costs up to 2050. With a total reduction of €21.1 billion for lorries/buses, reduction of NOx emissions from these vehicles is expected to have a slightly larger benefit. Additional health and environmental benefits are expected from the reduction of the particle number threshold from 23 nm to 10 nm in PO1. Lastly, the emission reductions for NH3 for cars/vans are expected to result in benefits up to €0.9 billion.

Although the damage costs by air pollution from transport take into account predominantly the impact on health, they also reflect impact on the environment such as crop losses, material and building damage and biodiversity loss due to particulate matter formation, photochemical oxidant formation, acidification, eutrophication and ecotoxicity of air, water and soil (see Annex 4, Box 3 and Figure 10 and 11). Hence, Table 4 , in which the monetised health and environmental benefits are presented, also reflects all relevant environmental Sustainable Development Goals (SDGs) of the 2030 UN Agenda for Sustainable Development. With monetary benefits estimated for these parameters in all policy options (see 6.2.3 and 6.3.3), PO1, 2 and 3 are not expected to do significant harm to any of the environmental SDGs.

By reducing harmful pollutants, a new vehicle emissions standard benefits citizens by curbing negative health impacts from road transport that cause respiratory and cardiovascular diseases upon inhalation e.g. bronchitis, asthma or lung cancer. This health benefit can be monetised using the concept of external costs developed for the Commission’s Handbook on the external costs of transport. It reflects the damage costs by air pollution from transport to health and environment. While benefits of reducing emission are independent of the absolute emission levels, the differences in exposure for metropolitan, urban and rural areas are taken into account. Combatting health impacts is expected to result in a reduction of medical treatment costs, productivity losses due to illnesses and even deaths.

For lorries/buses, NOx emission reductions are the only reductions expected in PO1. The Euro VI limits are already technology-neutral. The reduction of NOx emission, 7% in 2030 to 19% in 2050, derive from extended real-driving testing covering conditions outside the current PEMS boundaries and assumed increased frequency of ISC and MaS testing.

For cars/vans, NOx emissions are expected to further decrease by 13% in 2030 to 55% in 2050, compared to the baseline. This significant decrease follows from the introduction of low ambition extended real-driving testing covering conditions outside the current RDE boundaries and a technology-neutral NOx emission limit. Some reductions can be expected for particles, NH3 and CO emissions from cars/vans compared to the baseline.

As illustrated for key pollutant NOx in Figure 8 and all pollutants in Annex 4, Table 11, the emission reductions that can be expected in PO1 are rather limited. This is due to maintaining the current emission limits (only ensuring technology neutrality). Broader RDE testing conditions and improved OBD allowing for more effective ISC and MaS over the lifetime of vehicles do not change this conclusion.

Air pollutant emission reductions are expected to increase with time even with Euro 6/VI vehicle fleet renewal in combination with the impact of the new CO2 standards (see chapter 5.1).

A higher number of SMEs is expected to be indirectly affected by new vehicle emission standards as users (e.g. transport or logistics services, vehicle rental or leasing companies, companies using vehicles) due to price and affordability of light- or heavy duty vehicles. Assuming that costs translate into vehicle prices as demonstrated in the Euro 6/VI evaluation76, the total regulatory costs in PO1 are expected to be less than 0.5% of the estimated light- or heavy-duty vehicle price (see Annex 4, Table 17). Hence, only negligible impact is expected on the affordability of vehicles by SME users in comparison to the baseline.

Some SMEs manufacture vehicles or systems that require an EU emission type-approval. 35 SMEs were identified in the cars/vans segment, which are mostly small companies (i.e. staff headcount < 50 and either turnover or balance sheet total ≤ €10m). These 35 SMEs are building specialised vehicles on the basis of powertrains produced by larger manufacturers. Nevertheless, these SMEs rarely carry out calibration of the specific powertrains in order to make them comply with new emission standards. Since no significant changes to the emission control technologies and calibration of engines are expected in PO1, the impact on SME manufacturers is expected to be negligible.

The European automotive industry mostly comprises of large manufacturers active in vehicle assembly and component production. However, SMEs are present among the suppliers of equipment. They may be indirectly affected by newly required emission control technologies or other equipment.

PO1 is expected not to affect the intentions of Member States with regard to national initiatives aiming at tackling significant pollutant emission from road transport, such as bans for diesel or all combustion engines and the introduction of zero-emission zones (see chapter 2), putting at risk the functioning of the single market.

The assessment of access to international key markets, innovation and cumulative investments with CO2 emission standards (see 6.1.1.1) leads to the conclusion that no impacts are expected from PO1 on industry competitiveness.

PO1 requires almost no R&D efforts for development of emission control systems, neither for the cars/vans nor for the lorries/buses segments. Therefore, innovation of European companies in the supply-chain will not be encouraged nor will their competitive position improve in comparison to what is expected in the baseline. In all, positive effects on the mobility ecosystem as a whole are expected to be limited.

Nevertheless, PO1 is only expected to have a very limited effect in aligning the EU with emission regulatory developments in the United States and China. Only the extended RDE testing is expected to slightly improve the EU’s competitive position in real-driving testing. PO1 is not expected to change the access to international markets of EU’s automotive industry, given that other countries develop more ambitious emission standards.

The evaluation of the Euro 6/VI showed that global pressure to reduce transport emissions intensifies, not least because other key players, in particular China and the United States, have introduced or are planning to introduce more demanding vehicle emission standards.44 Despite the fact that the Euro 6/VI legislation have set the stage for real-driving testing worldwide, today EU is found to be lagging behind when it comes to i.a. pollutants coverage and emission limits.

While the European automotive industry is considered to hold a strong position in international trade, in recent years Europe has been overshadowed by other emerging markets. In 2019, about 20% of motor vehicles produced globally was produced in Europe, in comparison with 32% in the year 2000. The positive trade balance of EU cars have continued to decrease since 2015 with imports rising while exports of EU cars remained more stable. In 2018, EU exports of cars to main trade partners the United States and China still amounted up to €37 and €22 billion, in comparison to imports worth €6 and €0.5 billion respectively. A detailed description of EU export of motor vehicles to key destinations is available in Annex 4, section 1.4.1., for EU-27 passenger car exports as well as EU-27 motor vehicles (i.e. cars, vans, lorries and buses).

The views of stakeholders from industry, civil society and Member States on competitiveness were collected as part of the targeted stakeholder consultation. No specific views were expressed regarding PO1.

Table 5 (II.A) in Annex 3 presents an overview of these regulatory costs for manufacturers split up in one-off and recurrent costs linked to the different policy measures, including simplification measures and technology-neutral limits and extended real-driving conditions.

With the end-date of combustion-engine cars/vans by 2035, the cumulative annual investment of PO1 and proposed CO2 emission standards for cars/vans32,,32 over 2021-2040 amounts to €19.2 billion, out of which €19 billion is due to the proposed CO2 target and €0.2 billion due to PO1 (see Annex 4, Table 33). Hence, the investment attributable to PO1 is with 1% increase in annual investments not high. See detailed analysis on the cumulative impacts on industry in Annex 4 section 1.5.4.

These costs consist of both recurrent costs (e.g. for hardware) – that increase with the number of produced vehicles or type-approvals – and one-off costs (e.g. related to the development of new emission control systems) that are expected to be similar for the manufacturers, irrespective of size. Taking into account the market share of car/van manufacturers in the EU, the two largest manufacturing groups, which together had 46% of the car market in 2019, would have to invest a maximum of €0.7 billion each for the whole period 2025-2035. For all other car/van manufacturers, PO1 would only require a total investment between €0.2 and €0.3 billion for the same period. The total regulatory costs for the industry divided by the 12 main manufacturers of lorries/buses mean that each lorries/buses manufacturer would have to invest €0.02 billion. This a very small additional amount to the €59 billion each car manufacturer is estimated to invest for the shift to automation, connectivity and electrification.

Table 3 presents the total regulatory costs in 5-year intervals over the period of implementation of PO1. It shows that the largest share of the costs occur in the first five years after 2025. Since PO1 does only introduce changes in the requirements and emission testing for combustion-engine vehicles, the regulatory costs become zero after the proposed end-date of combustion-engine cars and vans in 2035.

Since PO1 allows for reduction of the number of type-approvals and tests with reporting requirements, the simplification measures translate into significant administrative cost savings in all vehicle categories. For cars/vans, administrative cost savings are estimated at €97 thousand per type approval fo