EU Seeks to Balance Emissions Controls and Global Competitiveness

Foley & Lardner LLP

The European Union has placed a growing emphasis on climate change policies in recent years, and the week of June 1519 marks the 10th annual European Union Sustainable Energy Week focusing on “sustainable mobility,” decarbonisation, and other energy topics. Earlier this year, the European Commission released its Energy Union proposal for the Paris Protocol, calling on an agreement and legally binding commitments to reduce global emissions by at least 60% by 2050. The proposal further built on the previous emissions law that the European Union passed approximately two years ago, targeting significant carbon dioxide emissions by 2020.

In light of the increasingly strict emissions targets, the European Automobile Manufacturers Association (ACEA) commissioned a study by FTI Consulting analyzing the links between EU carbon emission regulation and the competitiveness of the EU automotive industry. ACEA’s concerns are particularly important for an industry that accounts for 12 million jobs and 4% of the European Union’s GDP, and which the European Commission describes as “crucial for Europe’s prosperity.”

Earlier this month, FTI Consulting released their report and concluded that the industry is “disproportionately affected by decarbonisation” as compared to other sectors of the economy, including other industries and manufacturers. Notably, the FTI report found that the cost of regulation has impacted profitability of the automotive industry, as automotive manufacturers are not yet passing the costs of complying with the regulation on to consumers. After release of the report, the ACEA called on the European Union to “make sure that ambitious climate change policies do not conflict with the need to protect jobs and growth in Europe.”

As previously detailed on this blog, the European auto industry posted strong gains over the past year. However, in May, Western European car registrations rose only 0.2%, signaling a slowdown in the recovery. The European auto industry will continue to closely watch the pace of recovery and economic gains, while considering ways to both comply with the emissions regulations and strengthen global competitiveness.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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