Present European Union fuel economy standards discriminate against use of lightweight materials while an alternative basis for setting targets would cut the cost of more ambitious targets.
The European Commission has proposed a target to reduce carbon emissions from cars by 2020 to nearly a third below present levels, in a regulation currently awaiting European Parliament and member state approval.
It will announce plans for post-2020 targets in the first half of this year.
To date, the evidence is that the industry can absorb ambitious standards, meeting these ahead of schedule at costs that are below expectations.
It is tempting to suppose that it can continue to drive rapid gains in fuel economy (with important consequences for EU oil imports), assuming sustained high oil prices, but that depends on the incremental cost of new energy-saving technologies.
To date, manufacturers have driven relatively cheap fuel savings, for example by down-sizing engines and replacing these with turbo-charged, gasoline injection equivalents, and by introducing stop-start systems that automatically shut an engine instead of idling.
Further cheap efficiency gains could be achieved by tweaking the present benchmarking system, which sets emissions targets according to vehicle weight.
Shifting to an alternative parameter would motivate automakers to exploit lightweight materials and achieve cheaper efficiency gains than a wholesale shift to hybrid gasoline-electric power.
It seems reasonable to expect there are larger efficiencies yet to squeeze from the internal combustion engine, given a present conversion rate of road fuel at 15-20 percent, with the rest wasted as heat and other losses.
Fuel consumption falls as gasoline prices rise in a well understood, quantified price elasticity of demand.
Some studies have also found that demand falls with fuel price volatility.
It would therefore be reasonable to expect that a sharp rise in crude oil prices over the past 12 years, plus more recent volatility, should see a consumer response.
That would add to the impact of fuel economy standards and advances in energy saving technologies.
Consumers traditionally undervalue fuel savings, given uncertainty over future energy prices and driving mileages, while the EU experience supports the view that mandatory economy standards can overcome such inertia.
Manufacturers failed to meet voluntary targets through 2007, for example, contrasting with adoption of subsequent mandatory targets even though these required a step-change in annual emissions cuts.
From 2001 to 2007 emissions from new cars on fell by an aggregate 0.61-1.61 percent annually, and from 2008-2011 by 3.21-3.06 percent, according to monitoring data illustrated below and published in the European Commission's "Impact Assessment" accompanying its 2020 targets.
Trend in EU motor car CO2 emissions per kilometre
Source: European Commission
Regulators set the trajectory of fuel economy standards in part according to the estimated incremental cost of adoption.
Agencies including the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB) and ICCT (International Council on Clean Transportation) developed a teardown analysis approach to pin down those costs.
They broke down cars to their constituent parts and then calculated the incremental manufacturing cost of replacing parts with more energy-saving technologies or materials without sacrificing driving experience.
ICCT last May published findings from that analysis as applied to European models.
For example, it calculated the full incremental cost in 2012 of down-sizing a Volkswagen (VW) Passat engine with a gasoline injection, turbo-charged equivalent at 532 euros ($710).
It found the cost of replacing the conventional internal combustion engine in the same VW with a hybrid electric power train and start-stop technology at 2,323 euros.
ICCT concluded that manufacturers could meet the EU's proposed 95 grams CO2 per kilometre target by 2020 (compared with about 135 grams now) with only limited hybrid vehicle adoption.
WEIGHT VS FOOTPRINT
The question is whether manufacturers can wring out further savings without a more mainstream conversion to these more expensive hybrid technologies.
One option is to tweak the present benchmarking approach to encourage exploitation of lighter materials.
Under the proposed 2020 target, and existing regulation, European automakers have to meet emissions limits for new cars according to the average weight of their fleet.
This approach of assigning emissions limits according to a certain parameter value, in this case vehicle weight, is called the "limit value curve" in regulatory jargon.
"To comply with the Regulation, a manufacturer has to ensure that the overall sales-weighted average emissions of all its new cars or vans is not above the point on the limit value curve for its average utility parameter (in this case weight)," reports the Commission's Impact Assessment of its 2020 target.
The trouble with such an approach is that it creates a disincentive to cut weight: by doing so, the manufacturer also creates a more ambitious target for itself, as acknowledged in the Commission's assessment, published last July.
"Use of light-weighting technologies under a mass-based limit function not only reduces a vehicle's CO2 emissions but also its target.
"As a result light-weighting is a less attractive option when a mass-based limit function is used. The reduced effectiveness of light-weighting would lead to increased costs of meeting the target."
The alternative is a footprint approach, a measure of a vehicle's size obtained by multiplying its track width by its wheelbase, which would allow manufacturers to maintain their diversity of models while capturing fully towards their target the benefit of lighter materials.
A dual-compliance approach could allow manufacturers to use either measure for 2020, with a footprint-based approach beyond.
The ICCT estimated (results illustrated in chart below) that the average compliance cost for the EU's 2020 target would be as little as half under a footprint versus a weight-based regulatory structure, in a report published last month, "Summary of mass reduction impacts on EU cost curves", with important consequences for fuel economy ambition after 2020.
Additional manufacturing costs by manufacturer to meet 2020 standard on footprint vs weight approach