EUROPEAN COMMISSION

Brussels, 10.11.2022

SWD(2022) 359 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

PROPOSAL FOR A REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on type-approval of motor vehicles and of engines and of systems, components and separate technical units intended for such vehicles, with respect to their emissions and battery durability (Euro 7) and repealing Regulations (EC) No 715/2007 and (EC) No 595/2009

{COM(2022) 586 final} - {SEC(2022) 397 final} - {SWD(2022) 358 final} - {SWD(2022) 360 final}

Contents

1Introduction: Political and legal context

1.1Political context

1.2Legal context

1.3Interaction between Euro emission standards and other EU air pollutant policies

2Problem definition

2.1What are the problems?

2.1.1    Problem 1: Complexity of vehicle emission standards    

2.1.2    Problem 2: Obsolete vehicle pollutant limits    

2.1.3    Problem 3: Insufficient control of vehicle real-world emissions    

2.2What are the problem drivers?

2.2.1    Drivers behind the complexity of vehicle emission standards    

2.2.2    Drivers behind obsolete vehicle pollutant limits    

2.2.3    Drivers behind insufficient control of vehicle real-world emissions    

2.3How will the problem evolve?

3Why should the EU act?

3.1Legal basis

3.2Subsidiarity: necessity and added value of EU action

4Objectives: what is to be achieved?

4.1General objectives

4.2Specific objectives

5What are the available policy options?

5.1What is the baseline from which options are assessed?

5.2Description of the policy options

5.2.1    Policy option 1 (PO1): Low Green Ambition    

5.2.2    Policy option 2 (PO2a and PO2b): Medium and High Green Ambition    

5.2.3    Policy option 3 (PO3a): PO2a and Medium Digital Ambition    

5.3Options discarded at an early stage

6What are the impacts of the policy options?

6.1PO1: Low Green Ambition

6.1.1    Economic impacts    

6.1.2    Environmental impacts    

6.1.3    Social impacts    

6.2PO2: Medium and High Green Ambition

6.2.1    Economic impacts    

6.2.2    Environmental impacts    

6.2.3    Social impacts    

6.3PO3a: PO2a and Medium Digital Ambition

6.3.1    Economic impacts    

6.3.2    Environmental impacts    

6.3.3    Social impacts    

7How do the options compare?

7.1Effectiveness

7.2Efficiency

7.3Coherence

7.4Proportionality

8Preferred option

9How will actual impacts be monitored and evaluated?

Glossary

Glossary emission species

1Introduction: Political and legal context

1.1Political context

Air pollution remains the single largest environmental and health risk in Europe. 1  While air quality has improved, a significant proportion of the EU’s urban population is still exposed to pollutant concentrations above the limits defined by the Ambient Air Quality Directive 2 . Even greater proportion faces the pollution concentrations above the maximum levels recommended by the World Health Organization (WHO) 3 , while even low level of pollution was recently shown 4 to be associated with increased mortality due to cardiovascular, respiratory and lung cancer. Road transport is still a major contributor to air pollution, while other sectors like residential heating, industry, energy supply or agriculture are also important source of harmful emissions. It is estimated that road transport caused about 70 000 premature deaths in the EU-28 in 2018. 5 It was on average responsible for 39% of the harmful NOx emissions in 2018 (47% of the NOx emissions in urban areas 6 ), and 11% of total PM10 emissions in 2018 7 . The Dieselgate scandal 8  unveiled the widespread use of illegal defeat devices 9 in diesel vehicles, leading to abnormally high emissions on the road, compared to emissions tested in the laboratory. While the Commission has since introduced real driving emissions testing and modernised type approval procedures, the European Parliament Committee of Inquiry into Emissions Measurements in the automotive sector recommended that the Commission also proposes new technology-neutral Euro 7 emissions limits. 10

The European Green Deal 11  (EGD) is a new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy. The EU should also promote and invest in the necessary digital transformation and tools as these are essential enablers of the changes. In order to reach climate neutrality by 2050 and zero-pollution ambition for a toxic-free environment, all sectors need to transform, including the road transport. EGD foresees adoption of a proposal for more stringent air pollutant emissions standards for combustion-engine vehicles (Euro 7).

To accelerate decarbonisation of the road transport, the Commission proposed in July 2021 legislation on CO2 emission performance standards for cars/vans 12 , to ensure a clear pathway towards zero-emission mobility. 13 Moreover, the Commission adopted in December 2020 the Sustainable and Smart Mobility Strategy 14 and in May 2021 the Zero-Pollution Action Plan 15 . According to those strategies, transport should become drastically less polluting, especially in cities and Euro 7 is considered as a vital part of the transition towards clean mobility.

Last but not least, the New Industrial Strategy for Europe 16  offers tools to address the twin challenge of the green and the digital transformation and to support the European industry in making the EGD ambition a reality. New pollutant emission framework will offer legal certainty and first-mover advantage to the EU automotive sector, avoiding the risk of falling behind other major jurisdictions setting new pollutant emission standards. 

Transition towards only zero-emission vehicles fleet will however be spread across at least two decades, not least given the average lifetime of vehicles of more than 11 years. Meanwhile, in order to achieve the above policy objectives, it is imperative to ensure that the internal combustion-engine vehicles which will continue to be placed on the market are as clean as possible. This is a prerequisite for protection of human health, in particular in urban areas 17 .

1.2Legal context

Emission standards for light-duty vehicles (cars/vans), and heavy-duty vehicles (lorries/buses), were implemented in the EU since 1992 through a series of Euro emission rules which addressed one of the major sources of air quality problems, i.e. tailpipe pollutants emitted to the air. These standards are embedded in the general type-approval framework 18 , based on which new vehicle models are tested, granted type-approval and verified against a minimum set of safety and emission requirements before entering into service on the EU market. Over the years, with successive Euro standards, not only the specific limits for pollutants were tightened, but also the pollutant testing procedures were gradually modernised. The current emission standards were adopted in 2007 for light-duty vehicles (LDVs-Euro 6) and in 2009 for heavy-duty vehicles (HDVs- Euro VI). 19 20  They entered into force in 2014 for LDVs and in 2013 for HDVs. 21  

The testing procedures have been adjusted by implementing Regulations over the different steps of Euro 6b-d and Euro VI A-E between 2013 and 2022 (see Annex 5, Table 36 for details) 22 . The introduction of Real Driving Emissions (RDE) testing in 2017 (footnote 24 below) required testing of pollutants in real-driving and no more only in laboratory conditions, bringing about significant reduction of harmful emissions 23 . In 2019 also more stringent verification by in-service conformity procedure (ISC), ensuring that vehicles meet the emission limits during their service, was introduced. 24  

The Euro emission standards include references to testing procedures set out in UN regulations 25 . The UN World Forum for Harmonization of Vehicle Regulations focusses on the establishment of global harmonisation of technical regulations for vehicles. The EU as a contracting party, has ensured that all relevant UN Regulations are aligned with the Euro 6/VI emission limits and testing procedures.

1.3Interaction between Euro emission standards and other EU air pollutant policies 

As shown in Figure 1 , Euro emission standards for vehicles are interlinked with several other EU rules which tackle air pollutants of the road transport as well as with the CO2 emission standards 26  which reduce air pollutants as a co-benefit. 

Figure 1- EU rules tackling air pollutants in the road transport sector

·The scale of policy actions undertaken in Europe to specifically address transport-related air pollution has increased over recent years, reflecting the important contribution of transport to air pollution, in particular in urban areas. Local and regional air quality management plans — including initiatives such as low- or zero-emission zones in cities and congestion charges — are now used in many areas where the level of air pollution from transport is high. The Ambient Air Quality Directive (AAQD) 27 aims at improving air quality by setting limits for the ambient air concentrations of specific air pollutants from all air pollution sources (e.g. agriculture, energy, manufacturing, etc.). The National Emission reduction Commitments Directive (NECD) aims at reducing national air pollutant emissions by setting national reduction commitments for five specific air pollutants 28 , with reductions from all sectors, including road transport. The current AAQD/NECD cover ambient levels of air pollutants and emissions of road transport and the Euro emission standards for vehicles help Member States meeting their NECD reduction commitments.

As part of the European Green Deal, the Commission announced that it will revise in 2022 EU rules on air quality proposing to strengthen provisions on monitoring, modelling and air quality plans and revising the air quality legislation to align them more closely with the new WHO recommendations 29 . It is clear from the analysis 30  carried out by one of the most authoritative air quality modelling group in Europe, i.e. the International Institute for Applied Systems Analysis (IIASA), that full compliance will not be achieved without extra measures. In 2030 more than 52 million EU citizens will continue to be exposed to NOx concentrations higher than the WHO recommended air quality concentration levels due to road traffic. This analysis relied on incorporating the assumptions under the Option 3a of this Impact Assessment. This demonstrates the importance of limiting emissions at the source, by setting stricter emissions standards (such as the Euro ones for road transport) and requirements for improved fuel quality. The introduction of stricter Euro emission standards for all air pollutant emissions from road transport is needed in order for Member States to achieve compliance with new targets on air quality, while limiting the need to impose vehicle circulation bans. The interactions are further explored in the next sections.

·The CO2 emission standards support the EU’s climate ambition set in European Climate Law 31 , which aims at reducing EU greenhouse gas emissions by at least 55% by 2030, compared to 1990. Since the CO2 emission standards have proven to be an effective policy tool in this respect 32 , the Commission revised and strengthened the CO2 emission standards for cars/vans in July 2021 (see 1.1). Significant positive effects on air quality can be expected from the amendment of the CO2 standards, setting an end-date of 2035 for placing new combustion-engine cars and vans in the EU market. The revision of the CO2 emission standards for heavy-duty vehicles is foreseen by end-2022, aiming at increasing uptake of zero- and low emission heavy-duty vehicles and enhanced fuel efficiency of conventional engines.

·The Roadworthiness Directives 33  have the objective to increase road safety in the EU and to ensure the environmental performance of vehicles, by means of regularly testing vehicles throughout their operational lifetime. As far as emissions are concerned they have as objective to contribute to the reduction of air pollutant emissions by detecting more effectively vehicles that are over-emitting due to technical defects, through periodic technical inspections (PTI) and the roadside inspections (RSI). The Euro emission standards and Roadworthiness Directives should operate in a complementary way with the aim to reduce air pollutant emissions from road vehicles.

·The Fuel Quality Directive 34 sets obligation of reduction of air pollutants from liquid transport fuels, the Eurovignette Directive 35  sets common rules on road infrastructure charges and the Clean Vehicles Directive 36  promotes clean mobility solutions through public procurement. While the Euro emission standards require clean performance of vehicles, the Alternative Fuel Infrastructure Directive (AFID) 37 promotes the use of alternative fuels for road transport. The Eurovignette Directive and Clean Vehicles Directive may support the demand for clean vehicles by allowing Member States to vary road charges based on pollutant emissions of vehicles and by setting requirements for higher share of clean vehicles in public procurement.

2Problem definition

2.1What are the problems?

The negative impact of road transport to air pollution has only marginally decreased over the recent years. This relative stagnation is mainly due to the ever-growing vehicle fleet 38 and increase in transport demand compared to more significant emission reductions in other sectors 39 . Also, despite improvements in the emission regulation, gaseous pollutants, in particular NOx and exhaust particles are still emitted through tailpipes of ICE vehicles while non-exhaust particles are a result of brake and tyre wear produced by all vehicles, including zero-emission vehicles. This leads to more than 70% of ultrafine particles 40 in EU cities being attributed to road transport, either directly (primary emissions) or indirectly (secondary aerosol). 41  Furthermore, preliminary analysis done for the revision of EU air quality legislation30 carried out by one of the most authoritative air quality modelling group in Europe, i.e. the International Institute for Applied Systems Analysis (IIASA), has shown that full compliance with NO2 limits cannot be reached with today’s vehicle emission standards.

Since the entry into force of Euro 6/VI emission limits until 2020, NOx vehicle emissions on EU roads have decreased by 22% for cars/vans and by 36% for lorries/buses. 42 In addition, exhaust PM emissions from cars/vans have decreased by 28%, and by 14% from lorries and vans. THC emissions from lorries/buses went down by 14%, while THC and NMHC emissions from cars/vans went down by 13 and 12%.42 Further emission reductions are expected to be made as more Euro 6d and Euro VI E vehicles enter the market 43 . 

In the same Euro 6/VI period, health impacts and the related external costs of medical treatment and production losses due to illness and death were reduced by €97 billion EU-wide due to reduced NOx and PM emissions from road transport. 44 However, pollutant emissions caused by road transport still affect hundreds of thousands of European citizens and lead to significant health impacts and related external costs each year. In 2018 an EPHA study 45 estimated that any inhabitant of European cities suffered an average welfare loss of over €1 250/year due to direct and indirect health impacts of poor air quality, which is equivalent to 3.9% of income earned in cities. While these air quality problems are not exclusively caused by road transport, the same study demonstrated that a 1% increase in the number of cars in a city is expected to lead to an overall increase in health costs by almost 0.5%. 

NOx and particles (expressed as PM2.5) are the key air pollutants from road transport. In Figure 2 , the evolution of NOx and total (i.e. exhaust and non-exhaust) PM2.5 emission between 2010 and 2040 is shown first for cars/vans and then for lorries/buses 46 . The fit-for-55 package of 14 July 2021, i.e. the adopted CO2 emission standards proposing an end-date of 2035 for placing new combustion-engine cars and vans on the EU market as well as the projected fit-for-55 HDV fleet evolution to contribute to the 55% net greenhouse gas emission reduction by 2030 and the 2050 climate neutrality objective, have been factored in. The fit-for-55 package results in an expected increase of zero-emission vehicles in the vehicle fleet and, as Figure 2 shows, a decrease in both NOx and exhaust PM2.5 emissions. Following the proposed end-date of 2035, the emissions of NOx and exhaust particles from cars/vans are expected to decline more steeply than those from lorries/buses. Still, combustion-engine cars and vans will continue to be part of the European fleet after 2035. In 2040, 49% of European fleet of cars and vans is still expected to consist of combustion-engine vehicles, including hybrids 47 .

Moreover, increasing penetration of the latest Euro 6d/VI E vehicles in the fleet results in NOx and exhaust PM2.5 reduction (see Figure 2 ). However, Figure 2 also shows that there is no reduction of non-exhaust PM2.5 emissions from brake and tyre wear for neither cars/vans or lorries/buses, given lack of emission control technologies in place. Controlling such non-exhaust emissions is needed, not least because they are also emitted from zero-emission vehicles. The difference between total and exhaust PM2.5 will increase in the future for all vehicles. The projections to 2040 show that the zero-pollution ambition for a toxic-free environment, as set out in the European Green Deal, cannot be reached in the road transport sector in the near future with the current legislation in place. To improve our health and well-being in line with the Zero-Pollution Action Plan15, air pollutants emission needs to be reduced towards zero-pollution as rapidly as possible.

The NOx and exhaust PM2.5 emission limits are of particular concern given that they were set as early as 2007 for cars/vans, and 2009 for lorries/buses (and assessed more than two decades ago). Furthermore, approximately 20% of current real-driving mileages in Europe are estimated to be outside the RDE testing boundaries and therefore may exceed significantly the current emission limits63. Significant technical evidence on this issue was gathered by major research projects, including those of the Joint Research Center (JRC), GreenNCAP and AECC 48 , 49 , 50 , 51 , 52 , 53 . The test data were collected in a database run by the JRC 54 . Analysis of the data proves that when driven outside RDE testing boundaries, vehicles still emit significantly higher than when driven within RDE testing boundaries. As an example, the average of NOx emissions by diesel passenger cars outside RDE boundaries 55 is 475% higher than when driven within RDE boundaries. This means that just 1 km run outside the current RDE boundaries will pollute on average the same as 475 km run inside current RDE boundaries.

In addition, there are currently no emission limits for particles emitted by brake and tyre wear. As can be seen in Annex 4, the average tailpipe emissions of particles from a passenger car is currently much less than 1 mg/km, while the average particle emissions from the brakes is estimated to be 11 mg/km, i.e. more than 11 times higher.

Moreover, there is urgent need to address pollutants emission from heavy-duty vehicles. The projected fit-for-55 share of new combustion-engine heavy-duty vehicles including hybrids, placed on the EU market is expected to be 53% in 2040 (see Figure 7 in section 5.1), while the overall share of combustion-engine heavy-duty vehicles in the EU fleet would still be 86%47. At the same time, the NOx and exhaust PM2.5 emission limits for these vehicles were set in 2009, on the basis of engine testing only. Emission limits should be set on the basis of the emissions of the entire heavy-duty vehicle, as it is the case for light-duty vehicles.

Conclusion: Despite proposed end-date of 2035 for placing new combustion-engine cars and vans on the EU market, increasing share of zero- and low-emission heavy-duty vehicles and new Euro 6d/VI E vehicles entering the market, a zero-pollution level cannot be reached for NOx and total PM2.5 emissions from road transport. The main reasons are obsolete vehicle emission limits adopted over a decade ago, unaccounted real-driving emissions from cars and vans, not regulated vehicle brake emissions and the slower transition of lorries to zero-emission powertrains.

As shown in the evaluation of the Euro 6/VI emission standards, cost-effective pollutants emission reduction from road transport stems from the mandatory Euro standards introduced at EU level, which also support Member States improving their local air quality in line with current rules and in view of the proposed revision of the Ambient Air Quality Directives and meeting their emission reduction commitments under the National Emission reduction Commitments Directive.

Figure 2 – Magnitude and evolution of the problem of air pollutants related to road transport in EU-27 split up for cars/vans (a) and lorries/buses (b), with end-date of 2035 for new combustion-engine cars/vans and fleet renewal with Euro 6/VI vehicles 56

a)Cars and vans

b)Lorries and buses

The evaluation of the Euro 6/VI emission standards identified three main problems, relevant for the cars/vans as well as the lorries/buses segment, and the related problem drivers limiting their effectiveness (see  Figure 4 ). The problems: complexity of vehicle emission standards, obsolete vehicle pollutant limits and insufficient control of vehicle real-world emissions, explain why the current Euro 6/VI emission standards insufficiently contribute to the necessary reduction of pollutant emissions from road transport. This is of particular concern when considering the zero-pollution ambition of the European Green Deal.

Next to the negative impacts on human health and on environment, other consequences of the current Euro standards shortcomings have been identified. Firstly, the emergence of national and local measures aiming at addressing significant pollutant emissions from road transport. City or driving bans of vehicles with internal combustion engine put at risk the functioning of the single market 57  and could result in undermining consumer confidence in the automotive products. 58  Several Member States 59 request an end date for the sales/registration of new petrol and diesel cars or announced national initiatives to ban diesel or all combustion engines or to introduce zero-emission zones 60  in order to limit health impact of air pollution and address climate change concerns. In October 2021, there are already multiple Urban Vehicle Access Restrictions (UVARs) in the EU in place or in planning: 328 Low-Emission Zone (LEZ), 130 emergency pollution schemes, 36 zero-emission zones and 6 urban tolls 61 . There is a risk that uncoordinated action at national or local level could endanger the free movement of persons and goods in the single market.

Secondly, global pressure to reduce transport emissions intensifies as key markets, in particular China and the United States, plan more demanding vehicle emission standards.

China is progressing with an ambitious China 7 emission standards 62 . The China 6b emission standards for cars/vans (applicable in 2023), are already fuel-neutral and 40 to 50% more stringent than Euro 6/VI limits. 63 The emission limits in the US (Tier 3 Bin 30) are already well below the limits for almost all Euro 6 pollutants. 64  The US currently works on proposals for more stringent emission rules to improve the US competitive position on clean and efficient cars and trucks 65 , 66 . Furthermore, both China and the US have increased durability requirements up to 240 000 km or 15 years. In comparison, the current European requirements reach only 100 000 km or 5 years for the complete vehicle and 160 000 km for the emission control systems. These developments are especially important when considering that in 2019 the US was next to the United Kingdom the leading destination of EU exports of vehicles, with 19% of EU-27 motor vehicles 67 being exported to US (by value). With 12% of EU-27 motor vehicle exports, China is the second most important trade partner for the EU automotive industry (see Figure 13 Annex 4). 68  

Since Brexit, the United Kingdom has become the EU’s most important trade partner. In 2018, roughly one fourth of EU-27 exports was destined to the UK.68 It is assumed that any future mutual agreement will have the ambition to continue the implementation of Euro emission standards in the UK. Switzerland, Japan and South Korea are other main destinations for exports of EU vehicles. In 2019, Switzerland was the destination of 5% of EU motor vehicle exports. Since Switzerland participates in the EU Single Market for motor vehicles, Switzerland also follows the Euro emission standards. Japan, who is the destination of 5% of all EU exports of motor vehicles, employs emission control requirements for vehicles which are close to EU ones. South Korea is the destination of 4% of EU motor vehicle exports and has been following the European rules for diesel vehicle emission standards since 2002 with the Euro 6-level standard entering into force in 2020. 69  

At the same time, the EU automotive industry could maintain its competitive position on the global market of internal combustion technologies that will still play a role in several third markets for which a slower transition to zero-emission cars/vans is expected 70 , such as India, South-East Asia, Brazil or South Africa, and in the lorries/buses segment, where internal combustion engines will prevail for longer. By accelerating investments in zero-emission technologies, the EU automotive value chain should not put at risk its know-how on more traditional technologies that will continue to be important for countries with slower transitions.

In conclusion, key markets for EU export of vehicles, US and China, are developing more stringent standards and other main markets are following the Euro standards. Manufacturers can adapt the manufacturing of the vehicles’ emission control systems themselves to keep their export market share in key markets that are not supposed to follow the Euro emission standards, i.e. China and US. However, less regulatory entrance costs to these markets are expected with an ambitious Euro emission standards matching global developments. Without action, there is the risk that access to key markets could be hampered for EU manufacturers as it would become more costly to meet emission requirements in different markets.

Figure 3 – Comparison of latest emission limits in the EU, United States (Tier 3 Bin 30) and China for light-duty vehicles, Source: ICCT, 2019 71

The problem analysis shows that there are differences in the problems and need to act between cars/vans and lorries/buses segments (see Box 1).

Box 1 – Differences of the problems and need to act between cars/vans and lorries/buses segment

Figure 4 – Problem tree

2.1.1Problem 1: Complexity of vehicle emission standards

The overwhelming majority of the respondents (98 of the 128) to the public consultation 73  from all stakeholder groups consider the Euro 6/VI emission standards to be complex or even very complex, for the cars/vans as well as the lorries/buses segment 74 . While some stakeholders from industry consider this complexity to be justified to ensure that vehicles are clean, the majority of stakeholders from Member States, civil society and citizens see complexity as a factor hampering the necessary reduction of pollutant emissions from road transport. 75

While the overall architecture of the Euro emission standards is complicated, the evaluation of the efficiency of the Euro 6/VI rules has shown that in particular shift from Euro 5/V to Euro 6/VI increased such complexity. 76 A full overview of the Euro 6/VI emission standards, including the multiple dates of introduction of different requirements, clearly demonstrates it. 77 Euro 6/VI rules were built on the legislative text of their predecessors, adding new requirements on top of the already existing ones while not always referencing the UN international harmonised testing procedures or eliminating obsolete tests. As a result, the Euro 6/VI implementing Regulations span a total of more than 1.300 pages to define properly laboratory testing and on-road testing procedures for granting type-approval, Conformity of Production and In-Service Conformity. 78  

The evaluation showed that moving from Euro 5/V to Euro 6/VI emission standards has resulted in significant increase of costs during implementation phase for vehicle manufacturers, consisting of testing and witnessing costs 79 , type-approval fees 80 and administrative costs 81 . The increase of these costs was mainly caused by more robust on-road tests, however this was not accompanied by the removal of tests that became obsolete. The costs of testing of pollutant emissions and of witnessing those tests by type-approval authorities in the facilities of the manufacturers are estimated to have increased about 50% per engine family 82  for lorries/buses. Also for cars/vans, the manufacturers’ effort related to the testing have doubled with the introduction of Euro 6 and quintupled with the introduction of RDE testing. The administrative costs increased up to 50%, due to the additional manufacturers’ time and effort needed to meet the obligations to provide information. These costs are expected to stay rather stable over time, until new testing requirements are included.76 

The complex matrix of Euro 6/VI rules is particularly burdensome for the type-approval authorities and technical services. Both have experienced considerable increase of costs in terms of human resources to perform additional testing and witnessing and in terms of time it takes to complete a type-approval process. 76

2.1.2Problem 2: Obsolete vehicle pollutant limits

The second problem identified in the evaluation of the Euro 6/VI emission standards are obsolete vehicle pollutant limits, for the cars/vans as well as the lorries/buses segment. 83 The limits are of particular concern given that they were adopted over a decade ago (and assessed more than two decades ago). While the testing procedures for cars, vans, lorries/buses have been adjusted over the different steps of Euro 6b-d and Euro VI A-E, the emission limits were set as early as 2007 for cars/vans, and 2009 for lorries/buses.

The evaluation of the Euro 6/VI effectiveness made clear that the emission limits have achieved reductions for regulated NOx, PM, CO, CH4, THC and NHMC pollutants (see Table 1 ). However, these emission reductions would have been much higher if more pollutants than only NOx and PN were measured on the road and if state-of-the-art emission control technologies had been used. 84  

In addition, the evaluation of the Euro 6/VI has made clear that new harmful pollutants are emitted by road transport. 85 The use of new engine types, emission control systems, fuels and additives has led to worrying levels of pollutant emission not regulated by Euro 6/VI that cause significant harm to the environment and human health (ultrafine particles, N2O, HCHO, non-exhaust brake- and tyre wear emissions and, for cars/vans, CH4 and NH3). Table 1 shows that much lower emission reduction for unregulated pollutants compared to regulated pollutants is observed. N2O emissions even increased by 160% between 2010 and 2018 due to the use of catalysts. 86

Table 1 – Pollutant emissions from road transport in 2018 compared to 2010, Source: SIBYL 2021 87

While many technologies to further limit the emissions of regulated or unregulated pollutants have been developed since the adoption of Euro 6/VI and are mostly available on the market, only some high-end manufacturers adopted them proactively. Even more advanced technologies that allow additional emission reductions are already under development and will become available in the near future. These developments demonstrate a significant untapped past and future potential of road transport emission reductions that could have been achieved and can be achieved if such advanced emission control technologies are used.

2.1.3Problem 3: Insufficient control of vehicle real-world emissions

It is eye-catching that a majority of stakeholders from all groups consider that real-world emissions are not adequately monitored (72 out of 124) over the lifetime of vehicles, for the cars/vans as well as the lorries/buses segment. 88 More than half of the respondents from Member States and civil society 89 are not convinced that RDE testing ensure that vehicles are compliant with the pollutant limits in “all driving conditions” (while RDE addresses only “normal conditions of use”).88 This is reinforced by the scientific assessment performed during the supporting studies which estimates the distribution of the actual driving mileages in the EU. Approximately 20% of current driving mileages in Europe are estimated to be outside the RDE legal boundaries and therefore may exceed significantly the current emission limits63. Driving conditions or trips that are excluded from RDE testing are usually characterized by too low (less than -7°C) or too high ambient temperatures (more than 35°C), too aggressive driving, high altitude, etc. In addition, too short (i.e. less than 15 000 km) or too long car mileage (more than 100 000 km) are also not part of RDE. 

In 2017 real-world emissions of NOx were still several times above the allowed Euro 6 limit. Even though the latest Euro 6d step, adopted in the wake of Dieselgate, has endeavoured to close this gap between real-world and type-approved emissions, evidence from the evaluation of Euro 6/VI shows that this step only partially achieved it. 90  Such partial success is at least to a certain extent result of the regulatory choices made at the time of adoption of the first Real Driving Emissions Regulation 91 .

Moreover, Euro 6/VI durability requirements are significantly below the actual lifetime of vehicles in the EU. While the average age of cars on EU roads is around 10.8 years, the Euro 6 emission standards take into account a lifetime of only 5 years. Similar discrepancies in the durability requirements are found for vans, lorries/buses (see Annex 5, Table 46). Since in-service conformity of vehicles and durability of their pollution control devices is checked only for the prescribed 5 years, emissions are not properly controlled over the entire lifetime of vehicles. 92

An additional issue that was identified in the recent proposal of a Battery Regulation 93 , relates to the lack of control of the durability of the propulsion batteries in plugin hybrid and battery electric vehicles. This problem may lead to lack of consumer trust in such new technologies but also higher emissions in the case of plugin hybrids, where deterioration in the battery capacity will result in higher emissions from the internal combustion engine.

2.2What are the problem drivers?

2.2.1Drivers behind the complexity of vehicle emission standards

·Lack of technology-neutral and coherent emissions standards

The Euro 6/VI emission standards lack technology-neutrality. Different combustion engine technologies, spark-ignition (petrol), compression-ignition (diesel), used in the same vehicle category – cars, vans or heavy-duty vehicles – have to comply with different emission limits. Such differences of limits stringency and implementation dates result from the intention, at the time of their setting, to provide more flexibility for diesel technology. This distinction can no longer be supported.

Such technology preference limited the effectiveness and internal coherence of the standards in reducing pollutants emissions from road transport. 94  While diesel cars are allowed to emit 80 milligrams of NOx/km, petrol cars have to comply with a more stringent limit of 60 milligram NOx/km. Hence, sufficient NOx emission reduction is not achieved by diesel cars despite availability of appropriate emission control systems. Moreover, the PN limits do not apply to all petrol vehicles as the rules exclude port fuel injection (PFI) vehicles, which have an estimated share of 30% of new petrol vehicle registrations in 2020 95 .

89 out of 128 stakeholders from all groups participating in the public consultation confirm that different limits based on fuel and technology are complex – with Member States being relatively more convinced of this than industry. 96

According to Member States and civil society, separate regulatory frameworks between LDVs, and HDVs, are not coherent and contribute to complexity.96 While the obligations for emissions testing for LDVs and HDVs set out in the implementing Regulations 97 are relatively different, the architecture of the basic acts of Euro 6 and Euro VI 98 is almost identical. This calls for a single basic act for both vehicle categories.

·Different application dates of Euro 6/VI limits and tests

Another driver of complexity for Euro 6/VI emission standards is the gradual phase- in of different steps of Euro 6b-d and of Euro VI A-E, in combination with different application dates for different vehicle categories and, additionally, for new types of vehicles and for all new vehicles. Different emission limits due to different technologies (see above) required different application dates and specific testing procedures, which moreover continued to be improved.

119 out of 128 respondents to the public consultation from all stakeholder groups indicated that different application dates for Euro 6/VI steps are complex.96 Industry indicated that it would have been better to define the steps of Euro 6 b-d and Euro VI A-E at the time of Euro 6/VI adoption, instead of continuous addition of the steps, with no sufficient lead-time to industry.84

·Multiple and complex emission tests

The procedures and, to a lesser extent, the number of emission tests were pointed out by stakeholders from all groups as complex or even very complex features of Euro 6/VI. 99 In the targeted consultation, industry stakeholders pointed to the complexity of the test procedures as resulting in errors in performing of emission tests and calculations. Testing complexity required additional costly capacity-building by manufacturers in order to comply with the legislation. This significantly increased the overall costs during implementation phase (see 2.1.1). 100 Moreover, the evaluation identified various technical inconsistencies in the legislation. 101

2.2.2Drivers behind obsolete vehicle pollutant limits

·Non-exhaustive use of technological potential for reducing emissions

Technological potential exists for reducing emissions by using best available emission control technology. There are advances in thermal management, engine controls, filters and catalyst technology in petrol and diesel powertrains available on the market that allow vehicles to achieve emission significantly lower than the Euro 6/VI levels. 102 In addition, existing sensor technologies may contribute to the digital transformation and allow keeping emissions under well under control throughout the lifetime of a vehicle.

Therefore obsolete vehicle emission limits for regulated pollutants may be corrected, i.a. by introducing updated emission limits that lead to the use of available technology. In the public consultation, the large majority of respondents (55 out of 67) from Member States, civil society and citizens indicated that current technology offers room for additional emissions reductions. Industry had different views on the matter 103 . 104  

·Some technologies to reduce emissions of regulated pollutants cause emissions of new pollutants

Reduction of a given pollutant may result in higher emissions of another unregulated pollutant. This is for example the case for NH3 emissions resulting from cars/vans. The emission control technologies that are necessary to comply with NOx emission limits may cause a so-called ammonia slip due to excess dosing of urea.64 To tackle such collateral emissions, additional technologies are already used on a voluntary basis.

·Not yet regulated emissions of concern today

The introduction of new technologies in the vehicle fleet over the last decade, such as gas-fuelled heavy-duty vehicles that are expected to reach 5% market share by 202595, emit new pollutants. They are currently not covered by Euro 6/VI standards, although they are of concern, as confirmed in the evaluation of Euro 6/VI and the public consultation by all stakeholders 105 106 .

The current PN limits take into account particles larger than approximately 23 nm. As research shows, particles smaller than 23 nm, may have detrimental health effects as they can enter the bloodstream, thus reaching all organs. However, they are not yet covered in Euro 6/VI 107 .

CH4 emissions are up till now only regulated for lorries/buses. Natural gas lorries are expected to play a role in decarbonisation agenda, especially if blended with bio-methane or if full bio-methane is used. As CH4 fuel use is projected to increase (e.g. new registrations of CNG cars 108 ), limiting this greenhouse gas and ozone precursor also for cars/vans becomes important.

Brake and tyre emissions have become increasingly relevant sources of particles, especially since the exhaust particles were drastically diminished with the use of particle filters. This is due mainly to the number of vehicles on the road and km travelled leading to an increase of road transport activity from 3 200 Gvkm in 2010 to 3 500 Gvkm in 2018 (see Figure 6 in section 5.1) but also due to the increasing share of heavier and fast-accelerating vehicles such as SUVs and electric vehicles, although the later somewhat reduce such emissions by regenerative braking. In 2018, PM10 emissions from tyre and brake wear were equivalent to the PM10 levels of emissions that originate from the tailpipe of light- and heavy-duty vehicles6. According to the existing literature, it is expected that the non-exhaust contribution to vehicle-related PM10 emissions will reach 90% of total PM10 emissions in 2040 (see Figure 2 ). This is mainly due to the drop of exhaust emissions and the fact that brake- and tyre-wear is emitted by all types of vehicles, including zero-emission vehicles. In particular brake wear is recognized as the leading source of non-exhaust particles, harmful to human health due to its smaller size and composition and is emitted also by zero CO2 emission vehicles. A method for measuring brake wear emissions is under validation in the Particle Measurement Programme of the UNECE 109 .

2.2.3Drivers behind insufficient control of vehicle real-world emissions

·Limited effectiveness of On-Board Diagnostics

On-Board Diagnostics (OBD) monitor the functioning of powertrain systems and emission control technologies, in order to identify possible areas of malfunction during the life of the vehicle and inform the user of the need to carry out vehicle maintenance. The OBD is verified during In-Service Conformity (ISC) checks, Periodic Technical Inspections (PTI) – which take place at fixed intervals – and Roadside Inspections (RSI) – for which commercial vehicles are selected on the road.33

However, 78 of the 120 respondents to the public consultation from all stakeholder groups indicated that the limited effect of OBD measurement at least somewhat contributes to maintaining high levels of pollutant emissions 110 . In addition, 17 out of 28 respondents from Member States and environmental NGOs to the public consultation indicated that OBD does not ensure that new vehicles are compliant with the pollutants limits over their entire lifetime, while industry respondents are generally less sceptical on the functionality of OBD 111 .88 Evidence provided to the Euro 6/VI evaluation study by four key stakeholders – one from industry, one type-approval authority, one research institution and one environmental NGO – and the relevant JRC report revealed that the current OBD systems have only limited capacity to address durability and are ineffective in detecting and diagnosing degradation, failure or tampering of pollution-control devices. 112 , 113 In addition, today’s developments in the field of continuous emission monitoring allow for more comprehensive monitoring which is so far not properly reflected in the Euro 6/VI durability requirements. 114

This shows that despite the enhancement of the OBD thresholds in Euro 6/VI, the current OBD requirements do not allow for proper checks of emissions during the lifetime of vehicles or emission testing during ISC, PTI and RSI. 101

·Limited representativeness of on-road tests

Another driver of insufficient control of vehicle real-world emissions is the limited representativeness of the on-road tests. The shift towards RDE and PEMS testing in Euro 6/VI emission standards introduced a wide range of load, speed, temperature and altitude conditions to make sure that the emission limits are respected under a broad range of real-world driving conditions. However, not all driving conditions are covered by RDE and PEMS testing. Emissions tend to be higher outside the coverage of RDE and PEMS and important emissions remain therefore unaccounted for in the current testing 115 . NOx emissions, for example, were found to increase by 1.6 to 1.7 times in low ambient temperatures. 116 ,102  

·Inadequate durability and emission control tampering provisions

A final driver for insufficient control of vehicle real-world emissions is the risk of ageing, lacking maintenance and tampering 117 of vehicles and their emission control technologies. The evaluation of Euro 6/VI emission standards emphasised that the current durability requirements cover only the first half of the vehicle life (see 2.1.3). Considering this and the increasing complexity of pollution-control devices, there is a need for a more complete demonstration of durability in order to provide effective emission control over the lifetime. 84

The replies from stakeholders from all groups to the public consultation have proven that tampering (117 of the 124 replies), vehicle ageing (114 of the 127 replies) and the cost of vehicle maintenance (101 of the 123 replies) have contributed to an increase in real-world pollutant emissions. These results indicate that Euro 6/VI rules are not effective to prevent tampering and to control effectively emissions throughout the vehicle lifetime.110

2.3How will the problem evolve?

When considering the negative effects of air pollutant emissions from vehicles on human health and environment, improvements are expected over time in the absence of new action, for the cars/vans as well as the lorries/buses segment (see Figure 2 in section 2.1).

Fleet renewal will lead to an increased share of Euro 6/VI vehicles in the vehicle mix. As only 20% of cars/vans, and 34% of lorries/buses in the fleet are of Euro 6/VI standards in 2020, including RDE testing, the benefits of cleaner Euro 6/VI vehicles compared to previous Euro vehicles will continue to be felt in the coming years on EU road as older vehicles are replaced by these new cleaner Euro 6/VI vehicles.84

In addition, significant positive effects on air quality can be expected from the adoption of the package of proposals to make EU's climate policies fit for reducing net greenhouse gas emissions by at least 55% by 2030 (‘fit-for-55 package’) in July 2021 118 . The proposed amendment of the CO2 emission performance standards for new cars and vans sets an end-date of 2035 for placing new combustion-engine cars and vans in the EU market12. Additional effects from the planned revision of Ambient Air Quality Directive in 2022, which are estimated to be limited compared to the effects of CO2 emission standards, cannot be taken into account yet, but as explained earlier compliance with air quality standards cannot be achieved without more stringent emission limits for motor vehicles. See details in section 5.1.

At the same time, Figure 2 shows that there is need to act towards zero-pollution in the cars/vans as well as the lorries/buses segment to improve our health and well-being in line with the Zero-Pollution Action Plan and in particular in cities. See details in Box 1 in section 2.1.

3Why should the EU act?

3.1Legal basis

The Euro emission standards are based on Article 114 of the Treaty of the Functioning of the European Union. According to this Article, the European Parliament and the Council shall adopt measures which have as their object the establishment and functioning of the single market. Furthermore, the Euro emission standards have the objective to ensure a high level of environmental and health protection.

3.2Subsidiarity: necessity and added value of EU action 

The evaluation of Euro 6/VI emission standards emphasized the necessity and added value of EU action in this policy domain by illustrating that both action at national or international level are unlikely to lead to optimal outcomes 119  since both air pollution and road transport have a transboundary nature. Secondly, the development and governance of emission standards at EU level is key to ensure properly functioning single market. Differences in air quality policy ambitions among Member States could easily lead to a patchwork of different national measures (e.g. to measures limiting access to certain areas) that would create considerable obstacles for industry and pose great risk to the single market. Hence, continued harmonised EU action to further reduce vehicle emission is fully justified. In conclusion, the objectives of the proposed action cannot be achieved sufficiently by the Member States acting alone and can be better achieved at Union level by reason of scale or effects of that action.

4Objectives: what is to be achieved?

4.1General objectives

The general objective of the initiative is twofold: (1) to ensure the proper functioning of the single market by setting more adequate, cost-effective and future-proof rules for vehicle emissions; and (2) to ensure a high level of environmental and health protection in the EU by further reducing air pollutants emission from road transport towards zero-pollution, as required by the Zero Pollution Action Plan, as rapidly as possible.

4.2Specific objectives

This initiative will contribute to achieving the general objective by pursuing the following three specific objectives in line with the identified problems, relevant for the cars/vans as well as the lorries/buses segment (see chapter 2). It will:

1)Reduce complexity of the current Euro emission standards. This specific objective directly addresses the defined problem of complexity in the standards. Tackling complexities would allow for reduced administrative costs and costs during implementation phase and would facilitate efficient implementation of the Euro standards.

2)Provide up-to-date limits for all relevant air pollutants. This specific objective addresses the problem of obsolete vehicle pollutant limits in the Euro 6/VI emission legislation which prevent further reduction of air pollutants emission from road transport. Up-to-date limits based on best available technology and today’s knowledge on emission controls will allow to curb harmful emissions. That way, the functioning of the single market could be ensured, together with high level environmental and health protection in the EU.

3)Improve control of real-world emissions. This specific objective is a direct response to the problem of current RDE boundaries that do not cover all conditions of use throughout the lifetime of the vehicle which prevent further reduction of air pollutants emission from road transport. Achieving this objective would reduce vehicle emissions in a more systematic manner and improve environmental and health protection in the EU. It could also help guarantee the functioning of the single market by addressing challenges associated with urban vehicle access restrictions.

Figure 5 – Euro 7 objectives

5What are the available policy options?

5.1What is the baseline from which options are assessed?

The baseline to assess impacts of the policy options takes the following into account: a) the Euro 6/VI emission standards, b) the impact of COVID-19 on road transport activity 120  and c) the impact of the new 55% (cars) and 50% (vans) CO2 targets by 2030 and 100% CO2 targets for cars and vans by 2035 121 and the projected fit-for-55 HDV fleet evolution to contribute to the 55% net greenhouse gas emission reduction by 2030 and the 2050 climate neutrality objective 122  .

The baseline cannot take into account the effect of future potentially more stringent air quality targets which may lead to more cities banning combustion-engine vehicles and therefore modify road transport activity or vehicle sales, in the absence of more stringent emission standards for motor vehicles. Such possible effect of future air quality targets would be difficult to quantify since it will depend on local actions taken at Member States level and will not be uniformly applied throughout the EU. However, this additional effect from the planned revision of Ambient Air Quality Directive in 2022 is estimated limited compared to the effects of CO2 emission standards.

The baseline is a "no policy change" scenario which implies that the relevant EU-level legislation, addressing air pollutant emissions resulting from road transport will continue to apply without change. That means that Euro 6/VI applies, taking into account impact of the CO2 targets for vehicles, including the aforementioned new CO2 targets for cars/vans, and COVID-19 on road transport activity. It is referred to in chapter 6 as the baseline.

a)Euro 6/VI emission standards

The Euro 6/VI emissions standards19 and in particular the air pollutant emission limits and real-driving testing conditions set out therein are summarised in Annex 5, Table 34 and Table 35. They are assumed to remain in force. Moreover, as shown in Annex 5, Figure 19, the baseline assumes that fleet renewal would lead to a higher share of Euro 6/VI vehicles in the vehicles mix, mostly with cars/vans introduced under Euro 6 d step. The benefits of cleaner Euro 6/VI vehicles compared to previous Euro norms will increase in the next years as older vehicles are replaced with clean ones.84

Figure 6 – Evolution of total road transport activity in EU-27 considered in the baseline (in volume-km) 130

c)CO2 emission performance standards

The CO2 targets for vehicles laid down in the CO2 Regulation, including the new CO2 targets for cars/vans proposed in July 202112, also contribute to reduction of air pollutant emission from road transport. This is due to the increased sales of zero- and low-emission vehicles that are triggered by stringent CO2 targets for light- and heavy-duty vehicles, scaling up towards an end-date of 2035 for placing new combustion-engine cars and vans in the EU market. Electric and fuel cells powered vehicles do not have tailpipe emissions but do emit particles from brakes and tyres. Low-emission vehicles, such as plugin hybrids, also have less tailpipe air pollutant emissions. The CO2 targets, including the new CO2 targets proposed for cars/vans and the projections for heavy-duty vehicles, and their impact on the vehicle fleet, are included in the Euro 7 baseline.

As can be seen in Figure 7 , the share of new zero- and low-emission vehicles in the European vehicle fleet is projected to increase substantially over time, for LDVs much faster than for HDVs. The share of new zero-emission cars/vans is expected to increase from 9% in 2025 to 100% in 2035, whereas the share of hybrid and low-emission vehicles is expected to decrease from 35% in 2025 to 0% in 2035. The share of ICE cars/vans is expected to decrease from 56% in 2025 to 0% in 2035.

The projected vehicle fleet evolution is different for HDVs 131 . In particular long-haul lorries are not projected to shift swiftly to zero- and low-emission performance due to their need for high powered engines and long trips, while the electrification of buses is expected to happen faster due to their predominant use in urban areas. The share of ICE HDVs is expected to decrease from 70% in 2025 to 6% in 2050, whereas share of hybrid and other low-emission lorries is expected to increase from 26% in 2025 to 33% in 2050. New zero-emission lorries are expected to constitute 61% of the total in 2050.

Figure 7 – Projected powertrain changes in the vehicle fleet in EU-27 of new registration of (a) cars/vans, (b) lorries and (c) buses in the baseline until 2050 132 , 133  

The contribution of a) Euro 6/VI vehicles, b) road transport activity and c) CO2-related powertrain changes in the fleet to the evolution of NOx and PM2.5 emissions are shown in Figure 2 in section 2.1. The NOx emissions are expected to decrease by 87% between 2015 and 2050. Exhaust PM2.5 coming from combustion-engine vehicles decrease steadily over the next 30 years, while total PM2.5, include tyre- and brake emissions come from all types of vehicles and therefore remain significant.

5.2Description of the policy options

Table 2  gives a schematic overview of the policy options developed for this impact assessment, while a detailed description of the policy options is available in Annex 6.

In light of creating an adequate, cost-effective and future-proof Euro 7 regulation ensuring a high level of environmental and health protection in the EU, the policy options consider the green and digital transformation required by the European Green Deal. The transformation provides opportunities for more advanced solutions in terms of pollutant emission reductions, such as the use of low emission technology and continuous emission monitoring with advanced sensors and vehicle connectivity. The policy options take also into account the shift to electrified powertrains requiring cost-effective and adequate solutions for reducing pollutant emissions in the combustion-engine segment. All options are relevant for the cars/vans as well as the lorries/buses segment, whereas the impacts of the policy options are calculated separately for each segment in chapter 6.

All options presented in the tables require implementing legislation, with adequate lead time for the industry. Elements such as measurement methodologies, procedures and equipment, accuracy and repeatability of measurements, selection of vehicles and statistical procedures will be part of the implementing legislation. Most of these elements are either already available or under development both in the EU and in UNECE framework. The work for the implementing legislation will start in 2022.

Table 2 - Description of the policy options

1 A second sub-option in policy option 3 (i.e. PO3b – PO2a and High Digital Ambition) which added to PO2a high ambitious continuous emission monitoring, i.e. the development of new sensors that would require several years before they can be implemented, was discarded following the proposed end-date of combustion engine cars/vans by 2035 (see 5.3).

2 For lorries < 16t, buses < 7.5t: 375 000 km and for lorries > 16t, buses > 7.5t: 875 000 km

3 For lorries < 16t, buses < 7.5t: 450 000 km and for lorries > 16t, buses > 7.5t: 1 050 000 km

In line with the specific objectives, all options aim at reducing complexity of the current Euro emission standards by introducing simplification measures. Up-to-date emission limits for all relevant air pollutants should be provided in PO1 with low ambition, in PO2a and PO3a with medium ambition and in PO2b with high ambition. Control of real-world emissions should be improved in PO1 by low ambitious real-driving testing boundaries, in PO2a by medium ambitious real-driving testing boundaries and durability requirements, in PO2b by high ambitious real-driving testing boundaries and durability requirements and in PO3a by medium ambitious real-driving testing boundaries, durability requirements and continuous emission monitoring. That means, the completely new digital ambition of continuous emission monitoring to control real-world emissions is considered in PO3 only.

As the policy options are built on existing emission control and sensor technology, it is possible to introduce an application date of 1 January 2025 for all new registrations. As adequate lead time is needed for the industry to implement new rules, all secondary rules need to be finalised soon after entry into force of the Regulation.

The possibility for Member States to apply financial incentives at national level for early implementation of Euro 7 (i.e. between its entry into force date and its application date, i.e. the date by which all vehicles entering the market need to be Euro 7) are assumed in the policy options.

The modular approach of the policy options was proposed in the inception impact assessment and confirmed in the stakeholder consultations. 

The simplification measures, emission limits, real driving boundaries, durability and sensor requirements have been elaborated in the supporting studies63,77, 134 and discussed with stakeholders in the AGVES meetings.

5.2.1Policy option 1 (PO1): Low Green Ambition

PO1 implies a narrow revision of Euro 6/VI emissions standards to tackle complexity of the legislation (problem 1) somewhat addressing obsolete vehicle pollutant limits (problem 2) and insufficient control of vehicle real-world emissions (problem 3) with a low green ambition. This policy option was developed as a less intrusive approach. 135  

PO1 addresses key simplification and consistency challenges through refining the architecture of the Euro 6/VI emission standards. It assumes that a single framework for cars, vans, lorries/buses is developed, multiple application dates of Euro 6/VI steps are avoided and the multitude and complexity of emissions tests is reduced. To ensure technology-neutrality, this option foresees making the Euro 6/VI emissions limits consistent across different ICE technologies (see Annex 6, Table 48). This improves only marginally emission from diesel cars and vans, but all other emission remain the same, so especially for lorries/buses there is no significant change. NH3 limit is extended for cars and vans for the same reason it was already introduced for lorries and buses in Euro VI, i.e. to control ammonia slip from the current generation of catalysts.

The measures aiming at refining and simplifying Euro 6/VI emissions testing (see Annex 6, Table 47) remove obsolete testing and other obsolete provisions. PO1 allows testing of vehicles beyond the Euro 6d RDE and Euro VI E PEMS conditions (see Annex 6, Table 49). Both actions address the problem of insufficient control of vehicles’ real-driving emissions with a low ambition. PO1 explicitly refrains from digital control of vehicles’ real-driving emissions, i.e. continuous emission monitoring that would be a completely new element in the Euro standards and worldwide.

In light of creating a future-proof regulation, low-ambitious PO1 refrain from a green and digital transformation in view of the shift to electrified powertrains.

5.2.2Policy option 2 (PO2a and PO2b): Medium and High Green Ambition

PO2 implies a wider revision of Euro 6/VI emissions standards in order to tackle the complexity of the legislation (problem 1), to address obsolete vehicle pollutant limits (problem 2) and to partly address insufficient control of vehicle real-driving emissions (problem 3). While a PO2a will tackle the last two problems with a medium green ambition level, PO2b will address them with a high green ambition level.

PO2 builds on the same simplification measures as PO1. In addition, two ambition levels (medium and high ambition) of pollutant emission limits and boundary conditions are considered, to ensure up-to-date limits for all relevant air pollutants including some unregulated ones (see Annex 6, Table 50 and Table 51). The new pollutants added are HCHO, N2O, and particles from brakes 136 . HCHO, CH4 and N2O emission limits are set at the level of today’s emissions (i.e. a simple cap on emissions) to ensure that these emissions do not disproportionately increase in future vehicles or with new fuels.

In addition, PO2 will cover comprehensive real-driving testing conditions with medium or high ambition, to account for broader conditions than Euro 6d/VI E emission tests, e.g. low ambient temperatures or low speed driving (see Annex 6, Table 52 and 53).

PO2 also considers the need to address inadequate durability provisions. PO2 extends the requirements to comply with the emission limits for vehicles in use, i.e. the durability provisions, over the current inadequate period in Euro 6/VI. While PO2a introduces a medium ambition of durability provisions, e.g. 200 000 km for LDV; PO2b considers a high ambition, e.g. 240 000 km for LDV (see Annex 6, Table 54). Durability requirements will also cover propulsion batteries in PHEVs and BEVs, according to the developments at international level 137 .

In light of creating a future-proof regulation, PO2a considers a medium-ambitious and PO2b a high-ambitious green transformation towards zero-emission vehicles. Both sub-options refrain from a digital transformation, i.e. continuous emission monitoring that would be a new element in the Euro standards and world-wide.

In the stakeholder consultations, automotive industry and civil society representatives raised concerns, often having conflicting 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 in the policy options for low, medium and high green ambition (see Table 2 ), an alternative set of assumptions on emission limits and durability was therefore assessed to address remaining uncertainty in the medium green ambition (see Annex 8).

5.2.3Policy option 3 (PO3a): PO2a and Medium Digital Ambition

PO3 implies a profound revision of Euro 6/VI emission standards to tackle complexity of the legislation (problem 1), to address obsolete vehicle pollutant limits (problem 2) and to address insufficient control of vehicle real-driving emissions (problem 3) with a medium green and digital ambition.

PO3 builds on the same simplification measures as PO1, on the medium ambitious air pollutant emission limits, real-driving testing conditions and durability provisions of PO2a given that the high ambitious emission limits of PO2b cannot be reliably measured with either current or future sensor technology as was elaborated in the supporting technical studies (see Annex 6, Table 50, 52 and 54).

In addition, new continuous emission monitoring of pollutants over the whole lifetime of the vehicle is added in PO3. PO3a on Medium Digital Ambition is based on improved versions of available sensor technologies for NOx, NH3 and partly PM (see Annex 6, Table 55). Synergies with the on-board fuel consumption meters (OBFCM) introduced under the CO2 emission performance standards 138 will be exploited. PO3 would also facilitate the implementation of geo-fencing that puts a vehicle automatically into zero-emission mode when entering zero-emission zones.

New continuous emission monitoring is only part of PO3 because it adds a completely new digital dimension to the Euro standards making PO3 overall the most profound policy option. Such an approach has not been introduced up to now in any other emission regulation world-wide. While this new measure was highly praised by stakeholders from some Member States, component suppliers, civil society and citizens during the consultation activities, vehicle manufacturers took a more sceptical position on the matter. 139 Taking the above into account, it was decided to not add new continuous emission monitoring in PO1 to allow the assessment of lower ambition and less intrusive policy option.

In light of creating a future-proof regulation, PO3a considers a medium-ambitious green and digital transformation. Available pollutant sensors and the rise of connected vehicles provide the opportunity for increased enforcement, by continuously monitoring the state of the emission control systems. High emitting vehicles will thus be fixed earlier, or tampering117 of vehicles will be avoided. Additional cost gains, which are not included in this impact assessment, can be expected for the revision of the Roadworthiness Directives by replacing costly inspection mechanisms with over-the-air control of emissions.

A second sub-option, PO3b on High Digital Ambition, which would have been based on future sensor technologies, such as PM/PN and NMOG, was discarded following the proposed end-date of combustion-engine cars and vans by 2035 (see 5.3).

5.3Options discarded at an early stage

During the technical work in support to the Euro 7 proposal, a variety of technology driven policy option packages were evaluated both for light- and heavy-duty vehicles. Such technology-driven policy option packages would lead to varying stringencies of the emission limits. For light-duty vehicles 16 such variations were analysed (12 for gasoline and 4 for diesel) both in terms of technology readiness as well as for their potential for emission reduction. For heavy-duty vehicles 6 technology-driven policy option packages were evaluated for diesel and gaseous fuelled engines. From these technology packages only three levels were considered as compatible with the expected timeline of Euro 7 and technically feasible without restricting driving habits and were therefore retained in the policy options further analysed. 140

Stakeholders’ responses to the different consultation areas (see Annex 2), make clear that all three policy options initially developed for the inception impact assessment, i.e. PO1, PO2 and PO3, presented for public and targeted consultation and discussed in AGVES meetings received some support, although some simplification measures have been rejected - see list after consultation in Annex 6, Table 47. No stakeholder group required different ambition level and therefore policy options for the cars/vans and lorries/buses segment.

A second sub-option of PO3 (i.e. PO3b – PO2a and High Digital Ambition) was discarded following the proposed end-date of 2035 for placing new combustion-engine cars and vans on the EU market. PO3b added to PO2a high ambitious continuous emission monitoring, i.e. more advanced sensors such as PN/PM or NMOG sensors that are not yet available in the market and would require a few years of development before being employed (see 5.2). This would require high investment costs for vehicle manufacturers and component suppliers which would not be recuperated until 2035. Sensors for vehicles are designed for application in all vehicles, light and heavy-duty ones. With the planned end-date for combustion engines for cars and vans, the market for such sensors diminishes significantly. Even though such sensors could eventually be implemented in the heavy-duty sector for a longer period, such an investment for the limited number of heavy-duty vehicles sold each year would not allow to recuperate the high investment costs. Hence, PO3b was discarded, for light-duty as well as heavy-duty vehicles, to only include policy options that are achievable with existing technologies and in a timely manner for introduction into vehicles by 2025.

PO1 to PO3 are built in a modular approach by combining several policy measures with increasing ambition levels. Hence, one could in principle build variations of these policy options by making different combinations of measures. By changing the comprehensive real-driving conditions from medium to high ambition in both PO2a and PO3a, all else being equal, two other combinations of measures were assessed. 141  Since neither of these alternative combinations outperformed the effectiveness and efficiency of PO2a and PO3a with medium ambition comprehensive real-driving conditions, these combinations of measures were discarded at an earlier stage. 

Next to the stakeholder support for building upon the Euro 6/VI emission standards with PO1 to PO3, one could also think of solving the problems discussed in chapter 2 through voluntary measures, especially considering that many technologies for further reducing vehicle emissions are already available on the market. Nevertheless, their adoption is not likely to happen using voluntary measures, as was already shown by the scarce propensity of the industry to introduce any additional measures linked with emissions. This was demonstrated clearly in the antitrust case of the Commission against three major car manufacturers for restricting competition in emission after treatment systems for new diesel cars. 142 In particular, the manufacturers did not use better available technology (AdBlue tanks), as this was not explicitly required by the type-approval legislation. As discussed in section 2.3, this follows from the fact that emission control technologies do result in costs and subsequently higher vehicle prices, while perceived value of improved pollutant emissions performance by customers is often limited.

6What are the impacts of the policy options?

The quantification of the impacts of the three policy options, for the cars/vans as well as the lorries/buses segments, relies on a number of models which use input of regulatory costs and the emissions reduction performance of available or future technologies necessary to comply with the different policy options. The models used, i.e. COPERT and SIBYL, are amongst the most advanced in the field and are used widely both in Europe and around the world for the estimation of emissions from road transport. They are at the basis of the national and EU submission of emission inventories to Intergovernmental Panel on Climate Change (IPCC) and have been developed over the years with input from numerous projects. A network of experts from 57 leading EU institutions has been directing their development in Europe for the past decades 143 .

Such detailed models are needed in order to provide adequate detail both on the technological choices, mileage covered, vehicle age and other details which are crucial for estimating the emissions from the European fleet now and in the future. Models often used for other impact assessments assessing the fleet level (e.g. PRIMES, GAINS etc.) are less suitable for detailed modelling at vehicle level required for estimating the effects of changes in the type-approval legislation. Detailed information on the methodological approach can be found in Annex 4.

Industry strongly opposes disproportionate burden which may eventually trigger a decision to stop ICE production. They support in-between PO1 and PO2a solution. On the other hand, 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, while it may be expected that such digital solution as proposed in PO3a may raise concerns of social acceptability of continuous monitoring. However, such potential concern of making pollutant data from vehicles available was not raised by consumer organisations or citizens in the stakeholder consultations.

The aforementioned stakeholders were encouraged to verify or contest any result or assumptions in the extensive public and targeted stakeholder consultations, including interviews and confidential data sharing, and various AGVES meetings (see Annex 2). In total, more than 200 experts were participating in each meeting. Feedback and differences in stakeholders’ views received through these channels were carefully analysed and taken into account. In the assessment of the impacts of the policy options, in particular on industry competitiveness, consumer affordability and employment, qualitative stakeholder data has been triangulated with quantitative estimates and/or literary evidence depending on the specific impact (see each section below). A detailed overview of the stakeholder views and the use of the consultation results is included in Annex 2.

To ensure robustness of the analysis, the estimated impacts and their underlying assumptions have been cross-checked with independent experts and the concerned stakeholders, separately for the cars/vans and the lorries/buses segments. To address any remaining uncertainty, the level of confidence for each regulatory cost category and the health and environmental benefits was assessed. Based on the availability and quality of information, data and shared input by stakeholders, the administrative costs and costs during implementation phase (including testing and witnessing cost and type-approval fees) are characterised by a high level of confidence, the equipment costs by medium (R&D and related calibration costs) or medium-high (hardware costs for emission control technology) confidence. Medium-high confidence is also assumed for the health and environmental benefits that are calculated based on the models above and the Commission’s Handbook on the external costs of transport. 144  This medium to high level of confidence of the cost and benefit estimates valid for the cars/vans as well as the lorries/buses segments and verified by stakeholders and experts is considered sufficiently robust to present in chapter 6 average values for the cost and benefit elements. Nevertheless, the cost-benefit analysis in chapter 7 is complemented by providing ranges of expected costs and benefits, separately for the cars/vans and the lorries/buses segments, to make political choices based on the net benefits of the policy options. More information can be found in Annex 4 section 1.3.2.1. Uncertainty.

6.1PO1: Low Green Ambition

6.1.1Economic impacts

6.1.1.1Regulatory costs for automotive industry

The regulatory costs for automotive industry consist of substantive compliance costs (equipment costs for emission control technologies and the related R&D and calibration costs including facilities and tooling costs as well as costs during implementation phase for testing, witnessing of tests by type-approval authorities and type-approval fees) and administrative costs (reporting and other information obligations as part of the type-approval procedures). A detailed description of the cost categories is available in Annex 5, Table 39.

The simplification measures introduced in PO1 aim at reducing complexity, eliminating inconsistencies and improving effectiveness of the legislation. This policy option is expected to result in some cost reductions, especially of costs during implementation phase and administrative costs, largely due to the streamlined testing procedures or removal of obsolete ones. However, these cost savings would be offset by the expected increase in R&D, hardware and related calibration costs linked with technology-neutral limits and extended real-driving testing for all vehicle categories except for petrol/compressed natural gas (CNG) lorries/buses. For these vehicles, a small total regulatory cost saving of €2 per vehicle is expected. For diesel lorries/buses, the implementation of the simplification measures are expected to reduce costs during the implementation phase and administrative costs by €49 per vehicle. However, such cost savings would be offset by an increase in R&D and related calibration costs of €103 per vehicle. The total regulatory cost for lorries/buses are estimated at €44 per vehicle. 145  

Also for cars/vans, no total regulatory cost savings are expected. While cost savings during implementation phase and administrative cost savings are expected with the simplification measures, these will likely be exceeded by hardware, R&D and related calibration costs. The largest share of the latter costs follow from the need to ensure that emission are also controlled in enhanced real-driving testing outside the current RDE boundaries, while a smaller share is linked to introducing technology-neutral limits. In all, the total regulatory cost for cars/vans for industry are estimated at €60 per vehicle.

To ensure that no administrative burden is added, administrative costs 146  are assessed separately. Euro emission standards trigger recurrent administrative costs, including costs for reporting and compliance with other relevant information obligations as part of the process for granting type-approval, Conformity of Production (CoP) and In-Service Conformity (ISC). 147

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 for petrol cars/vans (€18 per vehicle) and at €126 thousand per type approval for diesel cars/vans (€17 per vehicle). For lorries/buses, savings of €30 thousand are expected per diesel type-approval (€14 per vehicle) and of €31 thousand per petrol type-approval (€31 per vehicle).

A detailed description of the total regulatory costs for automotive industry in PO1 compared to the baseline is available in Annex 4, section 1.3.1.1.

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.

Table 3 – Expected distribution of total regulatory costs in PO1 compared to the baseline, in billion € and 2025 NPV 148

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. 149  Taking into account the market share of car/van manufacturers in the EU 150 , the two largest manufacturing groups 151 , 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. 152  

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, 153 ,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.

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.

6.1.1.2Competitiveness

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.

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 154 , in comparison with 32% in the year 2000 155 . The positive trade balance of EU cars have continued to decrease since 2015 with imports rising while exports of EU cars remained more stable. 156 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. 157  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 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. 158

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.

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. 159  

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.

6.1.1.3Single market

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.

6.1.1.4SMEs

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.

Some SMEs manufacture vehicles or systems that require an EU emission type-approval. 35 SMEs 160 were identified in the cars/vans segment 161 , 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 162 . 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.

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.

6.1.2Environmental impacts

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).

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.

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.

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. 163

Figure 8 – NOx reductions from light- and heavy-duty vehicles in PO1 compared to the baseline, Source: SIBYL/COPERT 2021

6.1.3Social impacts

6.1.3.1Monetised health and environmental benefits

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. 164 165

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) 166 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.

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.

Table 4 – Monetised health and environmental benefits for PO1 compared to the baseline, Source: SIBYL/COPERT 2021

6.1.3.2 Employment and skills

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

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.

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.

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

6.1.3.3Consumer affordability

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. 167  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. 168  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.

Private users are not considered relevant for heavy-duty vehicles. The impact on SME users of heavy-duty vehicles are discussed in section 6.1.1.4.

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 169 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.

6.1.3.4Consumer trust

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 170 . 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.

6.2PO2: Medium and High Green Ambition

6.2.1Economic impacts

6.2.1.1Regulatory costs for automotive industry

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 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.

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.

Overall, this would result in total regulatory costs for cars/vans of €297 per vehicle in PO2a and of €475 per vehicle in PO2b.144 171  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. 172  

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 

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.

A detailed description of the total regulatory costs for automotive industry in PO2 compared to the baseline is available in Annex 4, section 1.3.1.2.

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. 

Table 5 – Expected distribution of total regulatory costs in PO2 compared to the baseline, in billion € and 2025 NPV

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.

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.

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.

6.2.1.2Competitiveness

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.

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.

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. 173  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 174 . 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 

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. 175  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.

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.

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.

6.2.1.3Single market

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 176 . 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.

6.2.1.4SMEs

The new requirements considered in PO2 could potentially be more difficult and costly to implement for the 35 SME cars/vans manufacturers 177  (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

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.

6.2.2Environmental impacts

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.

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.

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 178 .

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 ).

Figure 9 – NOx reductions from light- and heavy-duty vehicles in PO2a compared to the baseline, Source: SIBYL/COPERT 2021

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 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.

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

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.

Figure 10 – NOx reductions from light- and heavy-duty vehicles in PO2b compared to the baseline, Source: SIBYL/COPERT 2021

6.2.3Social impacts

6.2.3.1Monetised health and environmental benefits

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.

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.

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.

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.

Table 6 – Monetised health and environmental benefits for PO2 compared to the baseline, Source: SIBYL/COPERT 2021

6.2.3.2Employment and skills

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.

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).

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

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.

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.

6.2.3.3Consumer affordability

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.

Private users are not considered as relevant for heavy-duty vehicles. The impact on SME users of heavy-duty vehicles are discussed in section 6.2.1.4.

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.

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.

6.2.3.4Consumer trust

PO2 with stricter emission limits and comprehensive real-driving testing conditions positively impact the consumer trust in automotive products as it ensures systematic clean vehicles performance.

Also the responses to the targeted consultation suggest that stakeholders from all groups, except from vehicle manufacturers, 179 believe that there is potential for a new Euro legislation to further improve consumer trust in emission performance of vehicles and automotive products. 180  

6.3PO3a: PO2a and Medium Digital Ambition

6.3.1Economic impacts

6.3.1.1Regulatory costs for automotive industry

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. 181  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. 182 144 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).

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).

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, 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).

A detailed description of the total regulatory costs for automotive industry in PO3 compared to the baseline is available in Annex 4, section 1.3.1.3.

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).  

Table 7 – Expected distribution of total regulatory costs in PO3a compared to the baseline, in billion € and 2025 NPV

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

The total regulatory costs for the industry divided by 12 main manufacturers of lorries/buses translate to investment of €1.4 billion per lorries/bus manufacturer for PO3a.

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.

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.

6.3.1.2Competitiveness

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.

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 183 .

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 184 . 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.

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.

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 185 and to offer new solutions regarding the improvement of air quality.

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.

6.3.1.3Single market

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.

6.3.1.4SMEs

The CEM requirements could be more difficult and costly to implement for the 35 SME cars/vans manufacturers 186  (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. 

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.

6.3.2Environmental impacts

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).

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.

Figure 11 – NOx reductions from light- and heavy-duty vehicles in PO3a compared to the baseline, Source: SIBYL/COPERT 2021

6.3.3Social impacts

6.3.3.1Monetised health and environmental benefits

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. 

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 – Monetised health and environmental benefits for PO3a compared to the baseline, Source: SIBYL/COPERT 2021

6.3.3.2Employment and skills

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.

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.

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.

While the automotive industry is already expanding relevant expertise by investing in module integration, software development and semiconductor design 187 , 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.

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.

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.

6.3.3.3Consumer affordability

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.

Private users are not considered relevant for heavy-duty vehicles. The impact on SME users of heavy-duty vehicles are discussed in section 6.3.1.4.

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.

6.3.3.4Consumer trust

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.

7How do the options compare?

The options are compared against the following criteria:

·Effectiveness: the extent to which the different options would achieve the specific objectives;

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

·Coherence of each option with other EU rules tackling air pollutants in the road transport sector;

·Proportionality: overall assessment of the effectiveness, efficiency and coherence of each of the options.

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.

Table 9 – Comparison of the policy options for light-duty vehicles in terms of effectiveness, efficiency and coherence1

1 --- high negative, -- moderate negative, - low negative, 0 neutral, + low positive, ++ moderate positive, +++ high positive

Table 10 – Comparison of the policy options for heavy-duty vehicles in terms of effectiveness, efficiency and coherence1