After repeated delays, the European Commission last week released its proposed Euro 7 pollution rules, succeeding Euro 6, which came into force in 2014. This is significant because they will most likely be the final internal-combustion engine regulations enacted in Europe, with the EU requiring the sales of only zero-emission vehicles after 2035.
Automakers had fought against the new rules, arguing that money spent on new compliance measures could better be invested in lowering the cost of electrification, and that there will be little need for new rules because the proportion of internal-combustion engine sales will continue to fall ahead of the 2035 zero-emission deadline.
Stellantis CEO Carlos Tavares recently called Euro 7 a "diversion from the major goal of electrification."
The recent surge in inflation -- and car prices -- in Europe has added force to that argument. Whether that had an effect on the European Commission is unclear, but the proposed Euro 7 rules were not as strict as some automakers had feared.
Nonetheless, they mark a clear break from Euro 6, notably unifying the standards for diesel and gasoline vehicles on pollutants such as nitrogen oxides (NOx), toughening targets for trucks and buses, and setting limits on brake dust and tire particles -- which will make up the main source of pollution from road transport in the zero-emission age.
The regulations are now subject to ratification by the European Parliament and Council. The expectation is that they will go into effect for passenger cars and vans in July 2025, with trucks and buses in 2027.
Reaction to the proposal was mixed last week, but there are some clear (and not so clear) winners and loses.
Winners
Air quality: The European Union says that longtime exposure to pollution from fine particulate matter and NOx from road traffic was responsible for more than 70,000 premature deaths in 2018, with 300,000 deaths from all air pollution. Road transport accounted for 39 percent of harmful NOx emissions that year, the EU says.
Urban residents -- many of whom do not own cars -- are particularly affected, road transport accounting for 47 percent of NOx emissions in cities. Limiting such pollutants could save thousands of lives in the future; in 2035, the EU says, Euro 7 regulations will cut passenger car and van NOx emissions by 35 percent, and by 56 percent for buses and trucks. Brake particulates will be cut by 27 percent.
The emissions control industry: AECC, the trade group that lobbies on behalf of companies like Johnson Matthey, NGK and Vitesco that make catalysts and filters had called for an “ambitious” Euro 7 proposal. It did not necessarily get that, but any tightening of pollution regulations means more content per vehicle for its members. The official reaction from AECC is that it “welcomed” the Euro 7 proposal -- and, not surprisingly, pressed the European Parliament and Council to adopt the rules as soon as possible. In the long run, however, the EU’s effective ban on internal combustion engines after 2035 means that these companies’ revenues in Europe will decline sharply.
Brake and tire suppliers: A central promise of Euro 7 is that it will set limits for particulate matter from brakes and tires, which means that companies like Brembo and Michelin will be able to market new technologies at what is almost certain to be higher cost for their customers. Brembo, for one, says its Greentive brake disc, when combined with a special friction material for pads, can decrease emissions of particulate matter by 50 percent. Of note, brake dust limits for vehicles 3.5 metric tons or less are set at 7 mg/km until 2035, and then 3 mg/km thereafter; but tire emissions limits have not yet been set.
A toss-up
European automakers: At first glance, any regulation that increases costs and requires new technologies to be developed and certified looks like a loss for automakers. But only diesel vehicles -- a market that is already declining sharply -- face notably tougher pollutant standards, so on balance it could have been much worse. And automakers have been simplifying their combustion-engine offerings and reducing or eliminating R&D budgets as electric vehicles take a greater and greater share.
Nonetheless, the regulations will not be pain-free: A report from Morgan Stanley found that Europe’s biggest automaker, Volkswagen Group, could face 400 million euros in compliance costs on car sales, with No. 2 Stellantis at 350 million euros. This could further affect sales of small cars, which are disproportionately affected by any manufacturing increase. Already, most European automakers have abandoned the minicar segment, saying it would be too expensive to add more equipment either to reduce tailpipe pollutions and emissions, or to hybridize small engines.
Losers
Heavy trucks and buses: Diesel-powered trucks and buses will need to reduce their NOx output by 78 percent, to 90 milligrams per km, from 400 mg/km. This will lead to compliance costs of 2,700 euros per vehicle, the European Commission says. Even if such vehicles cost much more than passenger cars, that money could still have been used for investments into battery electrification and/or hydrogen fuel cells, and it could increase transport and shipping costs for all goods.
EU car buyers: The regulations are expected to add an average of several hundred euros -- 304 euros, to be exact, according to the EC -- in regulatory costs to prices that are already rising because of inflation, an increase in energy costs and the semiconductor shortages. In the meantime, automakers will be struggling to roll out affordable battery-electric vehicles, and the EV charging infrastructure remains a weak point.
Diesel engines: Under the proposal, diesel cars will have to cut NOx emissions by 25 percent to 60 milligrams per km, from the current 80 under Euro 6. Any added costs could hasten the decline of diesel offerings, an attractive option for those who regularly travel long distances. Higher costs or not, the market has been falling since the early 2010s, with the trend accelerating sharply after the 2015 VW cheating scandal. Many cities are now enacting bans on older diesels, with plans to ban all models in the future. In recent months, combined sales of full-electric and plug-in hybrid models have outstripped diesel sales in many markets; a decade ago, diesels accounted for as much as 70 percent of all sales in some countries.
