Detroit: not joining the green revolution, then

At least, not in a hurry. Changing preferences for vehicles and reactions to high oil prices have already prompted some big shifts in the industry, and increasingly, emissions and efficiency standards are driving yet more developments, in many parts of the world.

Europe and Japan have long been known for having the world’s most stringest standards on both mileage and emissions, and emissions regulations are becoming more strict. In the US, it is well known that sales of light trucks – AKA SUVs – began to fall rapidly, after first high oil prices and then the recession took hold. But the country is also set to enhance its fuel economy standards, first introduced in the wake of the 1973 Opec oil embargo, and there are new EPA rules targeting CO2 emissions.

As the FT reported last week, tougher emissions rules in Europe – the next stage of which will be introduced in 2014 – played a big part in the alliance between Daimler and Renault-Nissan:

Dieter Zetsche, Daimler’s chief executive, acknowledged the emissions legislation was a deciding factor in the Renault-Nissan partnership.

“For Daimler, this played a very significant role,” he said. “We have a great opportunity to become benchmark in the area.”

And analysts say these moves are inevitable:

“These technologies are utterly expensive and almost impossible to shoulder alone for carmakers like Daimler and BMW,” said Gregor Matthies, partner with the consultancy Bain & Company.

Daimler also has a 10 per cent stake in electric car start-up Tesla. But lower emissions rules were key, the FT says, in a host of other alliances such as Aston Martin teaming up with Toyota for its tiny Cygnet, Porsche’s failed attempt to takeover Volkswagen,  and Ford’s sale of its high-emission Jaguar and Land Rover brands to India’s Tata.

Amidst all this development, however, the new US rules (which are being mirrored in Canada) will not put North America in the lead. As the IEA points out, SUV sales, which accounted for more than half of passenger vehicle sales for most of the past decade, are projected to fall only from 50 per cent to 43 per cent by 2016. And both new efficiency and emissions rules are softer on SUVs:

Yet the new efficiency requirements still seem to privilege the production of light trucks over passenger cars. Light trucks require only a 3.4% annual improvement under NHSTA standards, while passenger car fuel efficiency must increase by 4.5% per year. Light trucks will remain under 30 mpg by 2016, 9 mpg less than passenger cars. The disparity is similar under the EPA requirements.

Of course, auto regulations are a politically sensitive issue in the US. But there is little to gain from being left behind. Remember that the Chinese government stopped Sichuan Tengzhong Heavy Industrial Machinery from buying the Hummer brand because of its high-emissions image, which lead to the brand’s demise.

Related links:

Comparison of passenger fuel economy standards and GHG emissions rules – Pew Climate (PDF file)

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