This article was written by Adrien Fabre, economist at ETH Zürich
On June 8th, you have certainly read headlines like “EU passes ban on combustion engine cars from 2035”. Many MEPs have rejoiced about this on twitter. Yet, technically, the text adopted by the European Parliament does not ban combustion-engine cars by 2035. No one seems to notice, no one seems to care, but the subtle difference between what is in the text and what is communicated may be a source of concern.
A regulation already exists that limits the CO2 emissions of new vehicles sold in the EU. The regulation imposes a target for the average emission of the cars that each manufacturer sells in a given year. The target, measured in gCO2/km, decreases over time. The European Parliament just voted to reduce this target more rapidly, and down to zero emission in 2035.
Yet, the regulation still allows car manufacturers to sell combustion-engine cars after 2035, provided they pay the price. Indeed, non-compliant manufacturers will have to pay a penalty for excess emission, computed as the number of vehicles sold times 95€ times the average emission in excess of the target. This rule did not change. This penalty would amount to 10,000€ for a car emitting 105 gCO2/km (i.e. close to the current average emission of new cars). Logically, car manufacturers would pass the penalty on the price of the car.
Given that the car market is global, and that not all world regions will put in place as stringent regulations as the EU, it seems likely that car manufacturers will still produce combustion-engine cars after 2035. It is also likely that some Europeans will be willing to buy combustion-engine cars despite the 10,000€ premium, especially among the well-off.
Why does it matter? First, it may undermine the effectiveness of the regulation, if sufficiently many people buy combustion-engine cars. Second, Europeans do not like that arrangement.
Indeed, this is what we find in a recent survey from Germany, Italy, Poland, and Spain (about 2,000 respondents per country, representative of the country’s population). The OECD will publish the full survey results on July 5th, but I can already reveal the main insights on this issue. On average over the four countries, 46% of the respondents support an outright ban on combustion-engine cars by 2030 while 34% oppose it (the others are indifferent).
However, the support for an ICE car ban falls to 24% (with an opposition of 58%) in the case of a penalty of a 10,000€ imposed on the manufacturers. We also tested a 100,000€ penalty, and the results are very close (23% support such a penalty, whilst 60% oppose it). When asked to rank the three variants, 64% prefer the ban to the imposition of a penalty. In other words, most people do not like a regulation if the rich can buy their way out of it.
Given these results, one may fear that in 2035, if car manufacturers still sell combustion-engine cars although a ban has been announced, some people will feel betrayed and protest the emission standard regulation or vote for parties which oppose climate regulations.
In Brussels, everyone fears the Yellow Vests, who have supposedly blocked the planned increases in the French carbon tax. Yet, our OECD survey shows that, in every country (including France), a majority of people would support a carbon price if the revenues it generates were used to compensate low-income households. The French carbon tax did not include such a provision, contrary to the plan of the EU Commission for a second emissions trading scheme (the ETS2). It is thus ironic that the MEPs bury the ETS2 and enact a penalty on combustion-engine cars (rather than a ban) out of concerns for fairness and public support.
In view of the survey results of European attitudes, the Parliament and the Council should reconsider their positions. The Council should amend the standard on car emissions to introduce the provision that “as of 2035, manufacturers shall not be permitted to register any passenger car with non-zero emissions of CO2.” And, as renowned climate economists argued in a separate op-ed, the European legislators should preserve the ETS2 envisioned by the Commission.
By Adrien Fabre, economist at ETH Zürich
After completing his Ph.D. at the Paris School of Economics, Adrien works as a Postdoc at the ETH Zürich, and will join CNRS as a researcher. He works on economics relevant for climate change. In particular, he conducts international surveys to study the political economy of climate policies. His research helps to understand the formation of beliefs about climate change and climate policies.