EC Introduces Sustainable Economics in Clean Vehicle Legislation

December 19, 2007 // Published as a news service by IHS

Under this new legislation, public authorities will use criteria for the lifetime costs of energy consumption, CO2 emissions and other pollutants when they procure vehicles. A harmonised methodology will be applied to quantify these costs.

Sustainable transport
Improving the health and welfare of the European population and achieving long-term environmental sustainability are important objectives for European Union (EU) authorities.

The challenge is particularly acute for the road transport sector, which depends essentially on oil as single energy source and emits significant quantities of CO2 and pollutants harmful to the environment and human health.

The continuing growth in the transport sector has increased concerns about the economic costs of energy supply as well as the impact on the environment. In the EU, the road transport sector is responsible for 26% of final energy consumption and 24% of CO2 emissions. Energy use and emissions from the road sector continue to grow around 2% per year.

The EU, on the other hand, is committed to an 8% reduction in greenhouse gas emissions by 2008-12 relative to 1990. Pollutant emissions from road transport contribute to a large extent to the poor air quality in many European cities where European Community standards are not met.

The main challenges related to sustainable transport are:

• Security of energy supply and dependence on oil.
• Climate change and CO2 emissions.
• Health effects from air pollution and pollutant emissions from vehicles.

Vehicle technologies that increase energy efficiency and reduce the emission of CO2 and pollutants have been successfully developed and demonstrated with the support of community funds. Broad market introduction, however, is often hampered by high initial costs and thus insufficient customer demand. Action at the European level is required to create markets of sufficient size to bring down the cost of vehicles with better environmental performance.

Internalizing the actual lifetime costs of vehicles for operators and for society as award criteria in the procurement process provides an economic instrument to ensure awareness of "sustainable economics."

Lifetime costs for vehicle operation
The key parts of energy and environmental costs are the costs of fuel consumption and emissions of carbon dioxide (CO2) and pollutants with an impact on health, such as nitrous oxides (NOx), non-methane hydrocarbons (NMHC) and particulate matter (PM).

Studies on the negative effects of traffic emissions have provided reference values per unit of pollutant emitted. Such values vary in relation with territorial context. Average values at the EU level have been estimated in particular by the BeTa^[1], ExternE^[2], UNITE^[3] and CAFÉ^[4] studies, which were widely reviewed by experts. Costs for CO2 emissions have been determined - for example, in the UNITE and ExternE projects, which both come very close in their estimations.

Examples of total lifetime costs, together with typical vehicle prices, are given in Table 1 for vehicles with present emission standards: a EURO IV bus, a EURO 4 diesel car and a petrol car. This monetisation shows the relative importance of costs incurred over the lifetime of vehicles, compared with the vehicle price invested into procurement.

An informed decision, taking into account the total cost of the vehicle's purchase price, the energy costs for the operator and pollutant costs for society could then be based on the sum of vehicle price and lifetime costs. This would minimise the overall costs for the operator and for society.

Table 1: Examples of Total Lifetime Costs and Vehicle Prices
(all costs in €)

Environmental gains with lifetime, cost-based procurement
The potential for energy savings and emissions reductions from clean and energy-efficient vehicles through promotion by public procurement has been estimated for the EC in a study by PriceWaterhouseCoopers (PWC)^[5] by assuming all decisions would be based on the sum of vehicle price and lifetime costs.

An energy savings of 22% of the vehicles covered could be achieved, resulting in a total amount of 4.6 terawatt-hours annually by 2017, by when the maximum effect from this measure could be expected. This savings corresponds to about half the annual energy production of a large nuclear power station.

CO2 emissions from the vehicles covered by public procurement could be reduced by 29% by 2017, giving a total of 1.9 mega-tonnes of CO2 avoided annually. This represents about 0.5% of all transport CO2 emissions.

Economic gains with lifetime, cost-based procurement
A cost-benefit analysis in the PWC study, weighing possible higher up-front investment costs for the vehicles against the savings from lower energy consumption plus reduced CO2 and pollutant emissions, shows potentially large economic gains for operators as well as for society.

Potentially higher costs for vehicles is largely compensated by the savings from lower fuel costs, which profits the operator directly. For the period up to 2017, possibly higher expenditures of €11.5 billion would be overcompensated by a savings of €21.3 billion from a lower energy bill.

Additional benefits of €2.5 billion savings can be expected due to lower CO2 emissions, and €9.4 billion savings due to lower pollutant emissions. The total net benefit over the period up to 2017 could amount to €21.5 billion.

For more information, see:

• EU web site on Clean Urban Transport
• Commission to promote clean and energy efficient vehicles (IP/07/1962)

^[1] P. Watkiss, M. Holland, "Estimates of the Marginal External Costs of Air Pollution in Europe," Didcot, 2002.

^[2] P. Bickel, R. Friedrich, ExternE, Methodology 2005 Update, European Commission, Luxembourg, 2005.

^[3] P. Bickel, S. Schmid, al., Unification of Accounts and Marginal Costs for Transport Efficiency, Stuttgart, Germany, 2003.

^[4] M. Holland, et al., CAFÉ 2005a, AEA Technology, Didcot, 2005.

^[5] EU web site on Clean Urban Transport.

Source: European Commission.

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