Commission staff working document - Summary of the impact assessment - Accompanying document to the Proposal for a Regulation of the European Parliament and of the Council setting emission performance standards for new light commercial vehicles as part of the Community's integrated approach to reduce CO2 emissions from light-duty vehicles {COM(2009) 593 final} {SEC(2009) 1454}
Date: 2009-09-30
Institutions: European Commission
Subjects: EU environmental policy, air quality, commercial vehicle, environmental standard, greenhouse gas, impact study, reduction of gas emissions, technical regulations

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.10.2009 
SEC(2009) 1455 

COMMISSION STAFF WORKING DOCUMENT 

SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying document to the 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

Setting emission performance standards for new light commercial vehicles as part of the 
Community's integrated approach to reduce CO2 emissions from light-duty vehicles 

{COM(2009) 593 final} 
{SEC(2009) 1454} 

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1. 

PROBLEM DEFINITION 

The overarching problem as identified in the earlier Communications (revised strategy on 
CO2 and light-duty vehicles1, impact assessment on the CO2 and cars proposal2) is that 
the  existing  policies  to  reduce  CO2  emissions  and  improve  fuel  efficiency  of  new  cars 
sold in the EU have not been able to deliver the progress needed for reaching the long-
standing EU objective of an average new light duty vehicles fleet CO2 emission of 120 g 
CO2/km.  

The  revised  strategy  COM(2007)  19  announced  that  the  Commission  would  propose  a 
legislative framework to achieve the Community target of 120 g CO2/km. A key element 
of the strategy consists in legislation on the CO2 emissions of passenger cars which was 
agreed in co-decision in December 2008, reducing the CO2 emissions of passenger cars 
to 130g/km on average. The strategy identifies additional measures to achieve a further 
reduction  of  CO2  emissions  by  10  g/km  (the  integrated  approach).  New  legislation  to 
reduce  the  CO2  emissions  of  Light  Commercial  Vehicles  (LCVs)  is  one  of  these 
measures.  In  view  of  the  increasing  share  of  LCVs  in  the  European  fleet,  lack  of 
efficiency  measures  for  these  vehicles  would  put  at  risk  the  full  achievement  of 
objectives of the revised strategy, including the objectives of the regulation on CO2 from 
passenger cars.  

An  extensive  discussion  on  the  appropriate  policy  instruments  that  should  be  used  to 
improve fuel efficiency and performance in terms of CO2 emissions in light duty vehicles 
already  took  place  in  the  context  of  the  Commission's  Communications  and  in  the 
proposal for a regulation on CO2 emissions from cars. The conclusion of this discussion 
was that voluntary agreements with industry did not bring the expected outcome and that 
a regulatory approach was the best solution to tackle the problem of rising CO2 emissions 
from light-duty vehicles. 

The EU is committed to reduce its total greenhouse gas emissions by 2020 by 20%, or by 
30%  if  a  comprehensive  international  agreement  is  reached.  It  is  clear  that  all  sectors 
have  to  contribute  to  the  reduction  effort.  The  emissions  from  LCVs  represent  around 
1.5% of EU total CO2 emissions and the demand for LCVs is growing. It is imperative 
that  growing  emissions  from  LCVs  do  not  counter  balance  the  effort  made  in  other 
transport modes and sectors of the EU economy. Moreover, further to the adoption of the 
regulation  on  CO2  from  passenger  cars  there  is  a  strong  rationale  for  regulating  other 
sectors  of  road  transport,  also  in  order  not  to  create  a  potential  regulatory  gap  where 
larger and highly emitting passenger cars could  avoid  the target. For  these reasons,  the 
business as usual option has been discarded from further analysis. 

1 
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COM(2007) 19. 
SEC(2007) 1723. 

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2. 

OBJECTIVES  

2.1. 

Policy objectives 

The general policy objectives applicable for the legislative proposal on light commercial 
vehicles are very similar to those developed for the CO2 and cars proposal, that is:  

•  Providing  for  a  high  level  of  environmental  protection  in  the  European  Union  and 

contributing to reaching the EU's climate change targets; 

•  Reducing  oil  consumption  and  thus  improving  the  security  of  energy  supply  in  the 

EU. 

The specific objective covers: 

•  To  reduce  the  climate  change  impacts  and  improve  the  fuel  efficiency  of  light 
commercial vehicles by means of a specified emission reduction for new vehicles in 
line with the revised strategy COM(2007) 19. 

The operational objectives include: 

•  Designing  a  legislative  proposal  that  efficiently  implements  the  fleet  average 
emissions  target  for  new  LCVs  and  prevents  any  regulatory  gap  which  could 
undermine the effectiveness of the regulation on CO2 and cars;  

•  Making the legislation compatible with the regulation on CO2 and cars for reasons of 

simplification; and 

•  Providing a regulatory framework that avoids any unjustified distortion of competition 

between automobile manufacturers.  

2.2. 

Consistency with horizontal objectives of the European Union 

The  policy  objectives  promote  innovation  and  technological  development,  enabling  the 
EU industry to achieve global leadership in the field of fuel efficient technologies in view 
of  oil  scarcity  and  of  fuel  efficiency  legislation  in  other  countries,  contribute  to  the 
Growth  and  Jobs  agenda  and  promote  highly  qualified  jobs  in  Europe.  The  policy 
objectives are in line with the Renewed Sustainable Development Strategy spelled out in 
June 2006 by the European Council which unanimously reconfirmed3 that "in line with 
the  EU  strategy  on  CO2  emissions  from  light  duty  vehicles,  the  average  new  car  fleet 
should achieve CO2 emissions of 140g/km (2008/09) and 120g/km (2012)". In addition, 
the  objectives  of  the  proposed  Regulation  to  reduce  CO2  emissions  from  light 
commercial vehicles (in addition to the legislation on cars) will have important share in 
the GHG reduction in the non-ETS sector as required in the Effort Sharing Decision. 

3 

Renewed EU Sustainable Development Strategy, June 2006. 

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3. 

POLICY OPTIONS 

The  supporting  study  on  light  commercial  vehicles  analysed  the  target  levels  set  in  the 
revised Strategy on CO2 emissions from light duty vehicles, that is: 175 g/km target in 
2012 and 160 g/km target in 2015. However, further to the major developments since the 
publication of the revised Strategy, i.e. improvement of available dataset and agreement 
of the Regulation on CO2/cars (with new target dates), an alternative date of introduction 
from the range 2013 to 2015 is also considered. The second step of 160 g/km envisaged 
in  the  Strategy  was  discarded  as  unrealistic  in  the  2015  time  horizon,  and  thus  is 
considered as part of the discussion on an additional target for 2020. 

The impact assessment analyses the following policy options: 

Option 1- 175 g/km target in 2012 with mass as utility parameter; 

Option 2- 175 g/km target in 2013-2015 with mass as utility parameter 

Option 3- 175 g/km target in 2012 with pan area as utility parameter; 

Option 4- 175 g/km target in 2013-2015 with pan area as utility parameter; 

Option  5-  percentage  reduction  targets  considered  for  both  2012  and  2013-
2015. 

All  the  above  options  are  also  assessed  in  view  of  the  slope  of  the  utility  curve  and 
autonomous mass increase (AMI) of 0% and 1.5%. 

In  terms  of  flexibility  mechanisms,  the  options  of  fleet  averaging  by  individual 
manufacturers, averaging amongst manufacturers of LCVs (pooling), as well as between 
both passenger cars and LCVs are examined. 

Following  the  approach  taken  in  the  impact  assessment  for  regulation  on  CO2  from 
passenger  cars,  the  excess  emissions  premium  has  been  identified  as  being  the  most 
suitable way of enforcing the regulation. The level of premium is of crucial importance 
for  the  effectiveness  of  the  scheme.  In  line  with  the  regulation  on  CO2  from  passenger 
car, the premium should be consistent with the marginal CO2 abatement cost. 

Finally,  the  additional  target  for  2020  (the  long-term  target)  complementing  the  short 
term  options  listed  above  is  analysed.  Further  to  the  analysis  performed  by  the 
consultant,  the  emissions  levels  from  the  range  125  to  160  g  CO2/km  have  been 
identified as potential future targets for LCVs.  

4. 

ANALYSIS OF IMPACTS 

4.1. 

Economic impacts 

The  distributional  analysis  of  options  listed  above  leads  to  conclusions  that  the  utility 
parameter based on pan area (option 3 and 4) is less cost-effective than the mass-based 
parameter (option 1 and 2). A serious drawback of pan area-based parameter is that the 
distributional impacts are much more spread out than in case of a mass-based utility. The 
individual  targets  for  some  manufacturers  become  more  stringent  for  pan  area  as 

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compared  to  mass.  Also  option  5,  despite  the  lowest  average  costs  and  the  most  even 
distribution of reduction effort between manufacturers, proves to have serious drawbacks 
of  penalising  past  effort  to  reduce  CO2  emissions  (discouraging  early  introduction  of 
measures to reduce CO2 emissions) and creates difficulties in defining the target for new 
market entrants. 

Utility  curves  with  lower  slopes,  i.e.  0%  to  40%  seem  less  suitable  for  LCVs  than  for 
passenger  cars  where  perverse  incentives  of  increasing  weight  in  order  to  gain  a  less 
stringent target are of greater importance. Light commercial vehicles are used to transport 
goods therefore there are fewer incentives to make them heavier. Also market shifts on 
the LCV market are usually not driven to the same extent by such incentives as luxury or 
increased comfort. Therefore, it is concluded that the risk of perverse incentives in LCVs 
is limited, and a higher slope than the one used for passenger cars can be applied.  

A  comparison  of  slope  variants  for  limit  functions  of  all  options  shows  that  the  sales-
weighted average retail price increase per vehicle is lower for higher values of the slope, 
although  the  difference  in  average  costs  is  not  very  significant.  The  most  even 
distribution  of  retail  price  increase  is  observed  between  100%  and  120%  slopes. 
However, even though the risk of perverse incentives of increasing the mass of vehicles 
to receive less stringent targets in LCVs is regarded as low, the slope of 120% is more 
likely to provoke these adjustments than the 100% slope. 

Further to the analysis conducted in the impact assessment on CO2 from passenger cars, 
an account of possible future developments (increase of the mass) of the market for light-
commercial  vehicles  is  taken.  The  autonomous  mass  increase  (AMI)  set  at  the  level 
greater  than  0%  increases  the  cost  of  meeting  the  average  target  and  makes  it  more 
difficult  for  certain  manufacturers  to  meet  their  targets.  In  view  of  a  less  significant 
probability of increase of mass of LCVs, a zero autonomous mass increase is therefore 
considered as the most suitable for this category of vehicles. 

The  analysis  of  cost-effectiveness  for  the  short-listed  options  (mass-based  utility 
parameter)  concludes  that  in  case  of  zero  AMI  the  emissions  reduction  target  of  175 
g/km for light commercial vehicles is cost effective to  society  (i.e.  the abatement costs 
are  negative)  at  both,  60%  and  100%  slope.  Costs  to  society  become  negative  at  oil 
prices ranging from 50 to 54 €/bbl and above . The difference between the two options is 
negligible in terms of costs to society and CO2 abatement costs. The overall amount of 
CO2 saved is slightly lower in the options with a later start date (2013-2015), because of 
the delay in the implementation of the target. The analysis of fuel price sensitivity shows 
that if the fuel prices decrease by half, the GHG abatement costs will be positive for 60% 
and  100%  slope  respectively  (€12.9  –  €15.7  per  tonne  CO 2  eq.)  as  the  higher  purchase 
costs will not be fully offset by the fuel savings. However, even in this unfavourable case 
they  are  within  the  range  of  the  EU  ETS  price  as  well  as  being  comparable  to  the 
abatement costs for cars as presented in the CO2 from cars impact assessment. 

4.2. 

Social impacts 

The  assessment  of  the  costs  to  the  society  revealed  that  the  retail  price  increase  of 
vehicles will be compensated by the fuel savings over the lifetime of the vehicle.  

The  regulation  on  CO2  from  LCVs  is  not  expected  to  have  a  significant  impact  on 
employment. The potential impacts will be similar to those expected for passenger cars 

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however, as the light commercial vehicles constitute only 10% of the automotive market, 
the share in the overall employment will be proportionally lower.  

The demand for light commercial vehicles is less elastic than in case of passenger cars 
and  an  increase  in  the  retail  price  resulting  from  the  legislation  is  expected  to  have  a 
marginal impact of less than 1% on LCV sales by 2020 compared to the base case, and 
decrease by less than 2,7% in 2030. 

4.3. 

Environmental impacts 

The  average  emission  reduction  for  the  2010-2020  in  option  1  is  about  67-77  million 
tonnes,  with  savings  being  slightly  higher  at  the  100%  slope.  The  CO2  reduction 
delivered  in  option  2  in  2020  amounts  to  about  60  million  tonnes.  The  difference 
between  the  options  is  caused  by  the  fact  that  the  target  of  175  g/km  will  be  achieved 
later than in option 1. 

The  introduction  of  a  long-term  target  from  the  range  of  125-160  g/km  in  2020,  in 
addition to the short-term target, allows for cumulative savings of 59-82 Mt CO2 eq. from 
2010 to 2020 depending on the chosen scenario (i.e. combination of short- and long-term 
targets) and 247-342 Mt CO2 eq. from 2010 to 2030. 

A  reduction  in  the  GHG  emissions  from  LCVs  for  option  2  in  year  2020  corresponds 
roughly  to  around  4%  of  the  total  reduction  effort  under  the  decisions  of  European 
Parliament and of the Council on the effort of Member States to reduce their greenhouse 
gas emissions to meet the Community’s greenhouse gas emission reduction commitments 
up to 2020. This is lower than 4.4% for option 1 which is due to the later implementation 
of the target. The introduction of the long-term target increases the non-ETS effort share 
of light-commercial vehicles to 5-6%. 

5. 

COMPARING THE OPTIONS 

5.1. 

Comparison of the two options 

Option 1 

Mass-based utility 

Target year – 2012 

Slope: 60% - 100% 
☺ 

Option 2 

Mass-based utility 

Target year – 2013-2015 

Slope: 60% - 100% 
(cid:46) 

67 to 77 Mt CO2 eq. until 2020 

At least around 60 Mt CO2 until 
2020 

5,4% - 5,8% per vehicle 

The cost of meeting this target for both start dates is similar if zero AMI 
increase is assumed 

7.9% - 8.3% per vehicle 

9.5% - 9.9% per vehicle 

Environmental 
impacts (i.e. CO2 
reductions) 

Average 
compliance costs 
(expressed as 
relative retail price 
increase for 60%-
100% slope) 

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Option 1 

Mass-based utility 

Target year – 2012 

Slope: 60% - 100% 

Option 2 

Mass-based utility 

Target year – 2013-2015 

Slope: 60% - 100% 

Higher cost results from the need 
to compensate for the autonomous 
mass increase of 1.5% 
(AMI=1.5%) 

Higher cost results from the need 
to compensate for the autonomous 
mass increase of 1.5% 
(AMI=1.5%) 

Cost-effectiveness 

-13.5 to -10.2 €/ton CO 2 eq. 

Around -13.5 €/ton CO 2 eq. 

☺ 

☺ 

(cid:46) 

(cid:46)/☺ 

Concerning slope and costs this 
option has similar characteristics 
as option 1. However, it provides 
manufacturers with more time to 
respond to the requirements of the 
legislation. 

Other economic 
impacts (incl. 
competitive 
neutrality) 

The slope of 60% makes it very 
challenging for some 
manufacturers producing larger 
vehicles (class III) to meet their 
respective targets. The slope of 
100% gives a more even 
distribution of costs over different 
manufacturers and on average a 
lower cost of compliance for the 
industry.  

The start date of 2012 is very 
challenging and does not leave 
enough lead time for 
manufacturers to adjust their 
production cycles. 

☺ 

☺ 

Other economic 
impacts - impact on 
businesses 
including SMEs 

Light Commercial Vehicles are 
mostly used by commercial 
enterprises including SMEs. At 
both slopes there are net benefits to 
the vehicle operator. 

At both slopes there are net 
benefits to the vehicle operator. 
Option 2 also offers net benefits 
per vehicle to the vehicle operator 
in the same order as option 1. 

☺ 

☺ 

Social impacts 
(employment) 

The higher added value on the 
vehicle is likely to lead to more 
employment along the value chain 
(similarly to effects of CO2/cars 

The higher added value on the 
vehicle is likely to lead to more 
employment along the value chain 
(similarly to effects of CO2/cars 

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Option 1 

Mass-based utility 

Target year – 2012 

Slope: 60% - 100% 
regulation).  

Option 2 

Mass-based utility 

Target year – 2013-2015 

Slope: 60% - 100% 
regulation).  

The adverse impacts on the sales 
of new vehicles are estimated to be 
very small: -0.69% to – 1.33% 

The adverse impacts on the sales 
of new vehicles are estimated to be 
very small, around -1%. 

Option 2 seems to be the most promising with an assumption of zero AMI and a 100% 
slope  of  the  utility  curve.  The  introductory  date  from  the  range  2013-2015  provides 
manufacturers with more time to meet the regulation however CO2 savings are higher for 
earlier  dates.  The  excess  emissions  premium  should  be  set  at  the  level  of  the  marginal 
cost of abatement of € 120/g to ensure co mpliance. Finally, the long-term target of 135 
g/km  by  2020  would  be  comparable  to  the  target  of  95g/km  set  for  emissions  from 
passenger cars and should be taken forward as a second step of the reduction effort.  

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