The EU carbon emissions legislation update and EVs

Reform of the European Union’s Emissions Trading Scheme (EU ETS) and its implications for electric vehicle uptake

One of the cornerstones of the EU's climate change mitigation policy to date is the EU Emissions Trading Scheme, known as the EU ETS. It has been implemented in 31 countries (currently 27 EU countries plus Liechtenstein, Norway and Iceland) and currently covers some 10,000 energy-intensive industrial installations, including power plants, district heating, combined heat and power plants, steel and chemical manufacturing, as well as airlines.  At the end of 2022, internal EU negotiations took place between the European institutions on ETS reform to lay the foundations for the implementation of the ‘Fit for 55’ package. The Council of the EU, the European Parliament and the Commission reached a preliminary agreement on the creation of a new ETS, separate from the current EU ETS (ETS1) and covering not only the current greenhouse gas emissions from energy-intensive industries, but also those from road transport fuels and the construction process. The new ETS is referred to as the BRT ETS 'Buildings and Road Transport Emission Trading System' or ETS2, to distinguish it from the EU ETS for industrial installations, ETS1.

What is zero-emission and what is low-emission transport? EU legislation currently defines low-emission vehicles as those with tailpipe emissions below 50g/km. They are therefore certain plug-in hybrids, fully electric cars and fuel cell vehicles (i.e. hydrogen-powered) . Zero-emission transport, on the other hand, are vehicles with no tailpipe emissions, i.e. electric (as well as hydrogen) powered vehicles. However, it is worth noting the life-cycle emissions of such vehicles (in particular the environmental costs that arise from the extraction and refining of rare earth elements), as well as the variable share of renewable energy supply in the production of the electricity these vehicles power in each Member State. Therefore, to describe them as zero-emission is a significant simplification that could even be considered greenwashing.

Will the European Union actually ban the sale of combustion cars? The ongoing transformation of the energy sector is supporting the electrification of transport. Electric vehicles are recognised in the EU as the future of European mobility. Support for the uptake of electric vehicles goes hand in hand with efforts to reduce emissions from combustion engine vehicles. In June 2022, the European Parliament (EP) supported the European Commission's proposal to achieve zero emissions from new cars and vans by 2035, and in October 2022, an interim agreement was adopted by the EU Council and the EP on the revision of CO2 emission standards for new cars and vans, which supported the goal of achieving zero emissions from new cars by 2035.  

However, it is worth correcting an oft-repeated, yet erroneous narrative here and clarifying that the above agreement does not imply a total ban on the production of new combustion-engine cars. It allows the production of combustion-engine vehicles to continue, provided that a certain proportion of the total fleet produced is electric, and that new combustion engines can burn CO2-neutral fuels. Therefore, the production of internal combustion engine vehicles in Europe may will continue beyond 2035, provided that zero-emission fuels for such cars come into use. The ban on the sale of new cars with combustion engines will also not apply to the second-hand market. These used cars, which will continue to be marketed and driven after 2035, create an emissions problem for legislators and policy makers at the EU level. For example, despite the visible decrease in recent years, in Poland, more than 60% of passenger cars purchased are second-hand , highlighting the scale of this ongoing source of emissions. 

The level of development of infrastructure needed to enable the replacement of internal combustion engine cars with electric ones is still insufficient, and there are valid concerns about the huge consumption of electricity that the transition to electric cars will entail and the related problems of stabilising the electricity grid. In the context of the current energy crisis caused indirectly by the armed conflict in Ukraine, investment in stabilising and modernising the electricity grid seems crucial. An important demand of 'Fit for 55' is also the repeal of Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the development of alternative fuels infrastructure and its replacement by a regulation - AFIR, which was submitted at the end of 2022 and is currently going through the legal processes before it take effect. Amongst other things, the draft AFIR aims to link the development of the electric car fleet to the increase in the capacity of the public charging infrastructure, i.e. obliging Member States to create an environment that is convenient for the use of electric vehicles.  

To achieve zero-emission for new cars, it will be necessary to reduce the average emissions of new passenger cars by 55% by 2030 and of new vans by 50% compared to the average emissions of these vehicle categories in 2021. Companies producing fewer than 10,000 passenger cars per year will have an extra year to comply. In contrast, smaller manufacturers producing between 1,000 and 10,000 new passenger cars or between 1,000 and 22,000 new vans per year can apply for derogations until the end of 2035. Companies producing up to 1,000 new vehicles per year, e.g. premium brands such as Ferrari or Lamborghini, will be completely exempt from meeting the requirements to reduce emissions from the internal combustion engine or manufacture zero-emission vehicles. 

In order to achieve decarbonisation of transport, it is not enough just to reduce the consumption of fossil fuels (oil and its derivatives, as well as LPG and CNG) and eventually eliminate them, but there is also a need for action to reduce emissions from electric cars throughout their life cycle. Above all, this means decarbonising electricity generation. Electric cars driven in countries such as Norway, where virtually 100%   of electricity is generated without burning fossil fuels, have a lower carbon footprint than, for example, the Netherlands where electricity is generated by burning fossil fuels (75% natural gas), the UK (76% natural gas and oil ) or Poland (>73% coal  ). An exemplary life-cycle emissions analysis showed that a medium-sized electric passenger car generates as much as 47 grams of CO2 per mile (1.6 km) and over 8.1 tonnes of CO2 before the vehicle reaches its first owner, in the extraction of raw materials and in the production of the vehicle itself. The production of a comparable internal combustion engine car generates only 32 grams of CO2 per mile and just over 5. 5 tonnes of CO2 before purchase by the first owner .  The same analysis also showed that in the worst-case scenario of using electricity produced entirely from burning coal, an electric vehicle would emit 4.1 tonnes of CO2 per year, while a comparable car with an internal combustion engine and the same mileage would emit around 4.6 tonnes of CO2 per year.

It is also necessary to take into account the lifetime of both types of vehicle, which for ICE cars is about 15-18  years and for electric cars, 8-12 years, and then compare the disposal costs of an electric car and its combustion engine counterpart.   At this stage of the transition to electromobility, we need to ask ourselves whether the steep decline in the replacement of the internal combustion engine fleet with electric cars is the right course, and whether the billions of euros in subsidies for recharging infrastructures and the purchase of electric cars should not be invested in measures capable of reducing consumption and the negative impact on the environment in the first place (e.g. public transport)?