Frost: Alternative Fuels, Hybrid Technologies to Assist in Reduced CO2 Emissions

June 4, 2007 // Published as a news service by IHS

According to Frost & Sullivan, all European original equipment manufacturers (OEMs) voluntarily agreed to reduce the fleet average of CO2 emissions to 140 grams/kilometer (g/km) by 2008 and 120 g/km by 2012.

With the 2008 deadline looming and the expectation that the Association des Constructeurs Européens d'Automobiles (ACEA) will instead, under a new agreement, change the industry fleet average to 130 g/km by 2012, European OEMs - specifically premium car manufacturers - face an uphill struggle.

In an attempt to reduce emissions, analysts said the European Commission (EC) proposed a blend of ethanol with gasoline and diesel. It also advised new car manufacturers to install gear-shift indicators and tire-pressure monitoring systems to assist consumers.

In light of these recommendations, analysts said it is clear that large-scale technological developments and efforts are required by OEMs to reduce CO2 emissions.

"As a medium-term strategy over the next three to five years, OEMs are expected to introduce micro hybrids, mild hybrids, ethanol, biofuels and LPG (liquefied petroleum gas) into their fleets to reduce CO2 emissions," said Frost & Sullivan research analyst Krishnasami Rajagopalan.

"These technologies offer increased fuel efficiency and reduced emissions, which help OEMs reduce their fleet average CO2 emissions."

In order to meet future CO2 emission targets, analysts said OEMs will need to have 40% to 50% of their fleet powered by diesel and 10% to 15% of the fleet running on biofuels, natural gas or on a hybrid powertrain.

Some volume carmakers - such as Fiat, PSA and Renault - have fleet averages of 140g/km to 150 g/km of CO2, and are well-positioned to meet the ACEA target for 2008. Analysts said premium carmakers, with a fleet average of 160g/km to 190 g/km of CO2, are not likely to achieve the same.

Going forward, analysts said reducing emissions below 140 g/km of CO2 will be possible mainly with the help of alternative fuels and hybrids (micro, mild and full). While OEMs are aware of this fact, further development and market acceptance of these alternative fuels and hybrids is restrained by the distribution network, availability and high implementation costs.

"While advancements in engine technology have helped reduce emissions to an average of 160 g/km, hybrids, ethanol, biofuels, compressed natural gas (CNG), hydrogen and fuel cells are necessary to reduce them further," said Rajagopalan.

"The main priority of OEMs today is to reduce emissions, which will require the help of local governments and fuel suppliers to promote alternative fuels and hybrids in a cost-effective manner."

Analysts said an integrated approach involving OEMs, investors, stakeholders, customers, local governments and fuel suppliers is important to reduce emissions below 140 g/km, particularly in the case of premium carmakers.

It remains to be seen if any local legislative bodies will impose penalties on OEMs that are unable to comply with the ACEA agreement by 2008. Analysts said it is quite clear that some OEMs will not meet the agreed limits by 2008 and will likely have to answer to stakeholders, legislative bodies and consumers.

Source: Frost & Sullivan.