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Capitol Comment

    Capitol Comment 266 - The ACEA Agreement: Reopening the Kyoto Café

    02/09/2000

    In July 1998, the European Commission and the European Automobile Manufacturers Association (ACEA) negotiated an agreement intended to reduce CO2 emissions from passenger cars. At the heart of this agreement is a commitment by ACEA to increase automobile fuel-efficiency by nearly 30 percent.

    In July 1998, the European Commission and the European Automobile Manufacturers Association (ACEA) negotiated an agreement intended to reduce CO2 emissions from passenger cars. At the heart of this agreement is a commitment by ACEA to increase automobile fuel-efficiency by nearly 30 percent. Although the agreement may seem inconsequential from an ocean away, the result of this action could have serious ramifications for American consumers.1 Specifically, the agreement could undermine support in Congress for a continued moratorium on raising Corporate Average Fuel Economy (CAFE) standards, while at the same time giving renewed impetus to ratification of the Kyoto Protocol to lower greenhouse-gas emissions.

    The European Union has been perfectly clear: it intends for the United States to ratify Kyoto.

    A voluntary agreement? ACEA includes companies such as BMW, DaimlerChrysler, Fiat, Ford, General Motors, Renault, Volkswagen, and Volvo. In 1998, ACEA negotiated what was characterized as a "voluntary" agreement to reduce CO2 emissions from passenger cars. Specifically, ACEA agreed to increase the average fuel-efficiency of its vehicles to an emissions target of 140 grams of CO2 emitted per kilometer in 2008 (approximately 40 miles per gallon), with an objective of reaching an average of 120g CO2/km by 2012 (approximately 50 mpg).2 This compares with the current average level of 171 g CO2/km (approximately 35 mpg).3 Reaching the 120g CO2/km target would represent a 40 percent increase in fuel-efficiency.

    On December 2, 1999, the European Parliament voted 460-20 to demand that the European Commission bring forward "a legal framework for the agreement … including measures to be taken in the event of failure of the agreement to work."4 In the words of the Parliament: "We have very little faith in voluntary agreements. We must have a legal basis for sanctions."5 ACEA — and its constituent members — found that when negotiating with government, agreements do not stay voluntary for long.

    The significance of the European Parliament’s actions should not be lost on American policymakers.

    A new opening for CAFE. CAFE standards are a federal mandate requiring that the average fuel economy of vehicles sold in the United States be no less than 27.5 miles per gallon for cars and 20.7 miles per gallon for light trucks, sport utility vehicles (SUVs), and minivans. The most direct method of complying with this mandate has been a reduction in vehicle weight. As a result, CAFE standards are blamed for more than 46,000 traffic fatalities since their enactment in 1975.6

    Efforts to raise CAFE standards even further have met with little success. Congress has repeatedly passed moratoria on increased standards as part of the Department of Transportation’s appropriations bills, and may do so again this year. The ACEA agreement, however, is certain to influence the debate. If automakers can sign onto a binding agreement to increase fuel-efficiency in Europe, CAFE proponents will argue, why can’t they do it here? Of course, the ACEA agreement was never supposed to be binding. It was, rather, the unfortunate result of a good faith effort by European automakers to bring new fuel-efficiency technology to market as quickly as possible. Whether the technology will be available in time to meet the targets outlined in the agreement is an unanswered question.

    Catalyst for Kyoto. The European Parliament’s success in making the ACEA agreement binding is also likely to become the catalyst for renewed efforts to ratify the Kyoto Protocol. This would not be the first time fuel-efficiency standards like CAFE have been used to advance greenhouse-gas reduction policies. As early as 1994, the Environmental Protection Agency advocated increasing CAFE standards as a way to comply with a possible global warming treaty.7

    Advocates of U.S. ratification of Kyoto will find fresh ammunition in a section of the ACEA agreement titled "Distortion of competition," which states: "The [European] Community will use its best efforts to continue to seek that other car manufacturing countries, notably Japan, USA and Korea, will undertake equivalent car CO2 reduction efforts, in line with the Kyoto Protocol spirit ensuring that the European automobile industry is not put at a competitive disadvantage in world markets by CO2 reduction commitments in Europe."8

    Ritt Bjerregaard, a member of the European Commission responsible for the environment, has provided additional reinforcement: "By committing itself to a substantial improvement in the fuel-efficiency of passenger cars, [ACEA] is delivering a major contribution to the EU’s overall greenhouse gas objectives. … I trust that Europe will not remain alone in this endeavour. Climate change is a global challenge — and all sectors will have to shoulder their responsibilities."9 The European Union has been perfectly clear: it intends for the United States to ratify Kyoto. What is less certain is whether or not others will join the call.

    An arcane agreement? The ACEA agreement may seem an arcane deal signed by a far-away government. However, the European Parliament’s actions mean that the ACEA agreement could impose serious costs on American consumers. Policymakers should be aware that the ACEA agreement could have a significant impact on the debate over CAFE and Kyoto in the very near future.

    1"Cleaning Up the Environment: A Good Record," ACEA Web site, 2/3/00.

    2Ibid; "ACEA Commitment on CO2 Emission Reduction From New Passenger Cars in the Framework of an Environmental Agreement Between the European Commission and ACEA"

    3Ibid.

    4The Bureau of National Affairs, 12/8/99.

    5Ibid.

    6USA Today analysis based on National Highway Traffic Safety Administration and Insurance Institute for Highway Safety data, 7/2/99.

    7Environmental Protection Agency memorandum. "More Tons," 5/31/94.

    8"ACEA Commitment on CO2 Emission Reduction From New Passenger Cars in the Framework of an Environmental Agreement Between the European Commission and ACEA."

    9"ACEA Commitment on CO2 "CO2 Emissions from Cars: The EU Implementing the Kyoto Protocol," ACEA Web site, 2/4/00.