Shift to low-carbon fleet will boost Europe's economy

18 March 2013, source edie newsroom

A shift to low carbon vehicles will reduce the total cost of running Europe's auto fleet and lead to "mildly" positive economic impacts including indirect employment gains, according to a new report.

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The report, from consultancies Cambridge Econometrics and Ricardo-AEA, compares two scenarios against a reference case where vehicle efficiency is frozen at the current level.

In the first scenario, named Current Policy Initiatives, cars and vans achieve the EU's proposed 2020 CO2 target of 95g/km and 147g/km respectively but efficiency improvements moderate to a rate of less than 1% annually thereafter.

The second scenario, called Tech 1, looks at if cars and vans achieve slightly higher efficiency levels in 2020 and continue along a similar trajectory of around 3% annual improvement thereafter.

It clarifies that "over-achieving on targets is a plausible scenario", because several automakers have already met their 2015 goals ahead of time.

At an EU level, the capital cost of the car and van fleet rises to €472bn in 2030 under the Current Policy Initiatives scenario, compared to €426bn in the reference case, where fuel-saving technology is frozen at current levels.

"This represents €46bn of additional capital costs. In this same scenario, the EU fuel bill, excluding fuel taxes and duties, is €166bn in 2030, compared to €246bn in the reference case. This represents avoided fuel costs of €79bn," the report states.

This makes the total cost of running and renewing the EU car fleet in 2030 about €33bn lower than in the reference case.

According to the report, this efficiency improvement feeds through to the wider economy in two ways. Firstly, there is a direct benefit to GDP from reduced imports of fossil fuels, which improves the trade balance.

Secondly, there are indirect benefits to households and businesses, as lower operating costs are passed on in the form of lower prices for customers.

"For households this means an increase in real incomes. For businesses, this gives a boost to competitiveness against foreign firms," it states.

Leigh Stringer