E-Mission Possible?

December 2019

Although climate change has been on the global agenda for decades, 2019 has seen the discussion ramp up several gears, with countries all over the world publicly pledging to tackle the escalating climate issue. With rapidly increasing CO2 levels cited as one of the main culprits fueling global warming, taking action to reduce levels has become a priority for governments worldwide.

The European Union has outlined some of the most ambitious targets to pave the way for a cleaner and greener future for its citizens, focusing significant effort on the reduction of the carbon footprint from diesel and petrol cars. The goal is a 15% reduction in C02 emissions by 2025 rising to a 37.5% reduction by 2030.

To meet these objectives, mandatory targets were set in 2009 and the first round of legislation came into effect in 2015 mandating 130g CO2/km for new passenger cars. However, just as carmakers are getting comfortable — provisional data suggests the average emission level of new cars is now 120.4g CO2/km — tougher legislation is just around the corner. From 2020, the EU is introducing a new target for CO2 emissions of just 95g CO2/km. Although there is an initial ‘phase-in’ period, which requires 95% of new car sales to comply with the target in 2020, fleets will have to be at 100% from 2021 onwards. Car makers who fail to comply face hefty fines that could run into the billions, with manufacturers paying £95 for each g/km of target exceedance.

No doubt, the pace in regulation is likely to radically change the automotive landscape, even more so than the Worldwide Harmonized Light Vehicle test procedure (WHLV) and Ultra Low Emission Zone (ULEZ), both of which went into effect earlier this year. Such low emissions will only be possible if manufacturers shift the focus of their fleets from fossil fuels to alternatively powered vehicles (APVs) — most likely, electric vehicles. Serious investments in cutting-edge technology will have to be made and factories will have to be overhauled to facilitate a new breed of vehicle. Some car makers are embracing this inevitable portfolio shift more than others; Honda, for example, has confirmed plans to only sell hybrid or electric cars in Europe from 2022 and other manufacturers are expected to follow suit.

As well as stricter regulations on emissions, many countries are seeking to ban diesel and petrol cars completely by 2040 (UK and France), making it essential for insurers to prepare to innovate for the future as the automotive sector transitions into a new, almost-emission-free era.