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Green cars initiative

Green cars

The global economy is in crisis – a crisis which is already putting car sales in jeopardy. As the car industry is a major employer, any major disturbance to the industry risks affecting the economic and social fabric of Europe. This is why the European Commission made the car industry a key focus of its recovery package, presented in November 2008.

At the same time, today's environmental imperatives mean that we need to encourage all road transport stakeholders to move towards more sustainable transport.

The European Green Cars Initiative responds to both these needs. It provides financial support to research into the green technologies that will propel our cars, trucks and buses in the near future – spending on research today to correctly meet the demands of tomorrow. These will take the form of grants from the European Commission's scientific research budget, and loans from the European Investment Bank.

Despite its name, the Green Cars Initiative is not only for passenger cars. Under the Green Cars Initiative, research will be funded in a variety of areas such as greener combustion engines for trucks, bio-methane, and electric and hybrid vehicles and infrastructure.

These financial support measures will be supplemented by demand-side measures, involving regulatory action by Member States and the EU, such as the reduction of car registration taxes on low CO2 cars to stimulate car purchase by citizens.

The EGCI is expected to have long-term effects, ensuring that our transport systems are both competitive, and environmentally friendly, in the aftermath of the current economic crisis.

Planning a route to recovery

The EU’s ambitious economic recovery plan aims to help the European economy accelerate out of the current crisis and put it back on the road to recovery. One important component of this package is the European Green Cars initiative.

© Peter Gutierrez

To tackle the economic crisis, EU leaders launched, in November 2008, an ambitious €200-billion recovery plan to put Europe back on the road to sustainable growth. “Exceptional times call for exceptional measures. The jobs and well-being of our citizens are at stake,” said Commission President José Manuel Barroso. “This recovery plan is big and bold, yet strategic and sustainable.”

The package contains both short-term measures designed to help the EU to turn the economic corner by boosting demand, saving jobs and helping restore confidence, as well as longer-term measures to put Europe back on a sustainable growth path through ‘smart investments’.

Smart, green and clean

The ‘smart investments’ in the recovery package focus on investing, through private-public partnerships, in environmentally friendly ‘green’ technologies. This will deliver the multiple benefits of providing European industry with a much-needed financial boost, enhancing Europe’s environmental performance, and bolstering European innovation and competitiveness in the increasingly important eco-technologies sector.

In addition to a European Energy-Efficient Buildings initiative worth €1 billion and a Factories of the Future initiative estimated at €1.2 billion, one of these smart investments is the European Green Cars initiative. Some €5 billion have been set aside for this, and it will be made available through European Investment Bank (EIB) loans, Seventh Framework Research Programme (FP7) grants, as well as demand-side measures and public procurement.

A key driver of the European economy

The automotive industry is one of the main ‘engines’ of the EU economy and that is why helping it steer the bumpy road of the current recession is vital for Europe’s long-term interests.

© Peter Gutierrez

The motor car was invented in Europe and the continent remains the world’s largest vehicle producer. Home to 15 international carmakers, the EU produces around 20 million vehicles a year, representing nearly a quarter of global output, according to the European Automobile Manufacturers’ Association (ACEA). More than 12 million Europeans are employed either directly or indirectly by the industry, according to ACEA.

The automotive sector contributes around €550 billion to the EU economy and is a major European export earner, contributing nearly €43 billion in net export revenues annually. In addition, vehicle taxes deliver European governments more than €380 billion in revenues each year.

Fuelling innovation

The automotive industry is one of the biggest private sector investors in R&D in Europe. In fact, it invests significantly more of its revenues – 4% or €20 billion, according to ACEA – in research than the EU’s 3% target. This makes the sector a major dynamo for innovation.

Automotive research seeks to develop safer and cleaner vehicles, as well as improve manufacturing, logistics and mobility management. This involves research into a wide range of areas, including materials, information technology, engines, fuels, recycling, aerodynamics, telematics and ergonomics.

Pole position for research into green cars

The European Green Cars initiative will dedicate funding to a number of research priorities, including electric and hybrid engines, as well as biofuels.

Peter Gutierrez
© Peter Gutierrez

The European Green Cars initiative will focus on five main areas of research: internal combustion engines, biofuels, electric and hybrid vehicles, logistics, and hydrogen fuel cells.

  • Electric and hybrid vehicles: This priority will focus on high-energy density batteries, advanced electric components and powertrain architectures, specialised internal combustion engines to extend the driving range and innovative vehicles to exploit these advances fully. A major roll-out of electric vehicles also requires research into smart electricity grids and intelligent vehicle charging systems.
  • Logistics: Congestion on European roads is a major cause of pollution, wastes time and energy, and is a threat to public health. Research in this area will focus on improving logistics, exploiting new transport modalities and improving the efficiency of transport networks.
  • Internal combustion engine: This priority will mainly focus on improving the fuel efficiency of internal combustion engines in lorries. Indeed, these heavy, long-range vehicles cannot easily be electrified given the constraints of battery technology, and therefore this, in addition to logistics and transferring freight to rail or shipping, will be one of the strategies for reducing CO2 emissions.
  • Biofuels: Research will focus on developing biomethane as a second-generation biofuel for buses and waste trucks.
  • Hydrogen fuel cells: The use of hydrogen to power vehicles has the potential to reduce pollution and increase the share of renewable energy in transport, while providing longer ranges than electric battery vehicles. The development of this technology will be mainly performed through the Hydrogen and Fuel Cell joint technology initiativeexternal link.

Mobility that does not cost the earth

The transport sector is a major contributor to greenhouse gas emissions and that is why the EU is pursuing a wide range of policies to reduce its environmental impact.

CO2 Reduction
© Peter Gutierrez

In the space of a century, cars have gone from being a rare luxury to a necessity of modern living. In 1911, estimates put the number of automobiles in Europe at just over half a million. During the intervening decades, the vehicle population has exploded and today there is around one car for every two inhabitants in the EU, according to Eurostat, the EU’s statistical office.

The convenience of increased mobility notwithstanding, the downside is the massive environmental impact of the transport sector. The cars Europeans drive create 12% of the Union’s collective carbon footprint. More worryingly, while the EU managed to reduce overall emissions of greenhouse gases by almost 5% between 1990 and 2004, CO2 emissions from road transport rose by 26%.

Emissions cutting drive

The EU has been pursuing numerous avenues to address this challenge. It has been working closely with auto manufacturers to encourage them to develop more fuel-efficient vehicles. Another policy priority has been improving public transport in order to encourage citizens to leave their cars at home. There have also been numerous initiatives and campaigns to encourage people to cycle and walk, such as the annual European Mobility Week, as well as to telework.

In March 2007, EU leaders signed up to the ambitious ‘Energy for a changing world’ package which commits Member States to cut their greenhouse gas emissions by 20% by 2020. It also sets a binding overall goal of extracting 20% of the EU’s energy supplies from renewable sources. In January 2008, the Commission agreed an action plan outlining how these targets could be achieved.

Greener regulations

This article sums up EU legislation to promote more environmentally friendly and energy-efficient vehicles.

Regulations
Regulations
© Peter Gutierrez
  • Before the end of 2009, the Commission will release a proposal to revise the EU Directiveexternal link on the CO2 labelling of cars which sought to “ensure that information relating to the fuel economy and CO2 emissions of new passenger cars… is made available to consumers in order to enable consumers to make an informed choice”.
  • In February 2007, the European Commission outlined a comprehensive new strategyexternal link to reduce CO2 emissions from new cars and vans sold in the EU. The strategy seeks to put the Union on the path to achieving its long-established objective of limiting average emissions to 120 grammes per km by 2012 for passenger cars.
  • An EU Regulationexternal link on passenger car CO2 emissions has been recently published. The Regulation limits the average CO2 emissions for passenger cars to 130 grammes per kilometre; it is assumed that additional measures will bring the total down to 120 g/km. By 2012, 65% of each manufacturer's newly registered cars must comply with this target and, by 2015, compliance will reach the 100% mark. A more stringent target of 95g/km is specified for 2020.
  • The European Commission is in the process of preparing draft legislation for CO2 emissions from light commercial vehicles, i.e. vans and minibuses. This proposal is part of the Integrated Approach taken by the Commission in its revised strategy to reduce the CO2 emissions from cars and light commercial vehicles.
  • In March 2007, EU leaders signed up to the ambitious ‘Energy for a changing world’ package which commits Member States to cut their greenhouse gas emissions by 20% by 2020.
  • The Directive on the promotion of the use of biofuels and other renewable fuels for transport (known as the Biofuels Directive ) which entered into force in May 2003. Its aim was to replace 5.75 % of all transport fossil fuels (both petrol and diesel) with biofuels by 2010. Concerns over rising food prices and environmental degradation are prompting a rethink of EU biofuels policy. The drive towards use of renewable energy in transport will however be reinforced by the inclusion of electric cars in the fleet, allowing a higher use of wind and solar energy.
  • The EU offers so-called ‘super credits’ external link to carmakers that manufacture vehicles which emit less than 50g of CO2 per kilometre, thus providing additional incentives for the introduction of electric vehicles.

Steering EU funds towards green cars

The European Green Cars initiative has been allocated €5 billion in EU funds, but where will the money come from?

Funding mechanisms
© Peter Gutierrez

There will be two main sources: about €4 billion in loans from the European Investment Bank (EIB) and €1 billion from the EU’s Seventh Research Framework Programme (FP7).

The EIB loansexternal link will support organisations carrying out research, development and innovation focusing on cleaner forms of road transport, particularly emission reductions. Funds available under FP7external link will go to groups of organisations conducting collaborative research into one of the initiative's priority areas – notably the electrification of road transport.

In addition, EU Member States are being encouraged to implement certain demand-side mechanisms, including the use of public procurement as a tool for promoting the development of green automotive technologies, as well as reductions in road tolls and in registration and road taxes for low-emissions vehicles.

Financing electric ideas

Funding available under the Seventh Framework Programme for the European Green Cars initiative will focus initially on electric road transport, turning to the initiative’s other priority areas in subsequent years.

The EU’s Seventh Framework Programme (FP7), which runs from 2007 to 2013, funds a wide range of transport-related research. In fact, transport is one of the main themes of FP7’s Co-operation programme which promotes collaborative research across Europe.

Work in this priority area aims to develop safer, greener and smarter transport systems which will benefit European citizens, respect the environment, and increase the global competitiveness of European industries. FP7 funds research into all modes of transport, be they on land, sea or in the air.

The funds available for the Green Cars initiative will be used for research into passenger cars and trucks, both at vehicle and at system level. Research focused on the vehicle will focus on electrification, for passenger cars, and on clean engines fuel efficiency for trucks. Research into systems will look at the organisation of urban traffic, and the optimisation of freight logistics.

Four calls for proposals worth over €100 million will be published in July 2009, inviting applications for funding in areas related to the electrification of road transport, including electric batteries. Most of the projects funded by this call will begin work in 2010. For 2011, calls will be launched in 2010 covering other aspects of the Green Cars initiative, such as greening truck combustion engines and freight. In 2011, there may also be a call on ‘smart grid and recharging systems’.

Banking on innovation

The European Investment Bank (EIB) manages a number of lending instruments which can be tapped by the European Green Cars initiative.

There are two EIB loan facilities which are being utilised by the European Green Cars initiative: the European Clean Transport Facility (ECTFexternal link) and Risk-sharing Finance Facility (RSFFexternal link).

The €4-billion per year ECTF finances research, development and innovation focused on reducing emissions and improving energy efficiency in the European transport sector. Its main beneficiaries are the automotive (both manufacturers and suppliers), railway, aircraft and shipping industries. Although the EIB does carry out some direct lending, the mechanism of choice is co-financing through intermediate banks, usually the borrower’s ‘home bank’.

The RSFF is a joint EIB-Commission facility which seeks to improve access to debt financing for private companies or public institutions promoting research, technological development, demonstration, and innovation investments. Among other priorities, this innovative scheme also funds green car technologies.

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