New passenger cars - information on fuel consumption and CO2 emissions

UK Regulations implementing Council Directive 1999/94/EC relating to the availability of consumer information on fuel economy and CO2 emissions in respect to the marketing of new passenger cars.

Regulatory impact assessment

Title

Regulatory impact assessment on national legislation to implement a European directive requiring fuel economy and CO2 emissions data to be made readily available to prospective car purchasers.

Purpose and intended effect of the measure

The issue and objective

The directive is part of the European Community's strategy for reducing emissions from road transport. It aims to provide potential purchasers of new passenger cars with the relevant information on fuel consumption and CO2 emissions in an effort to influence their choice towards more fuel efficient models. A similar scheme has operated in the UK since 1983. The directive specifies four ways of improving consumer information:

• A label attached to each new passenger car displayed at the point of sale, detailing information on fuel consumption and CO2 emissions.
• The dissemination of a summary guide containing the fuel economy and CO2 emissions data of every vehicle in the new car market.
• Information displayed on a poster at the point of sale.
• The inclusion of fuel consumption and CO2 emissions data in all promotional literature produced by manufacturers to market specific models of new car.

This fuel economy information scheme is part of the Community's wider strategy to reduce average CO2 emissions from new passenger cars to 120g/km by 2010, compared to the 1998 estimated average level of 186g/km. It is designed to support and complement the other strands of this strategy. These include voluntary agreements with the European, Japanese and Korean automobile manufacturers to reduce average CO2 emissions from new passenger cars to 140g/km by 2008 and fiscal measures. Without improved information on fuel economy there is an increased risk that consumers will move to less efficient models, offsetting any technological improvements in new car fuel efficiency that manufacturers might produce.

International action to combat climate change is co-ordinated through the UN Framework Convention on Climate Change (UNFCCC), which has the ultimate objective of stabilising greenhouse gas emissions and so reducing the risk of human actions damaging the global climate. At the Kyoto conference of the parties to the UNFCCC, held in December 1997, the European Commission adopted the conference protocol, committing it to an 8% reduction in overall EU emissions of six greenhouse gases, including CO2, by 2008-2012 relative to the levels in 1990. If the EU is to meet this target, then CO2 emissions from road transport are a particular concern, as they continue to experience strong growth, although UK road transport CO2 emissions have fallen over the past couple of years. Passenger cars account for approximately half of CO2 emissions from the transport sector and some 13% of UK CO2 emissions.

The directive was adopted on 13th December 1999 and specified a deadline for transposition into national law of 18th January 2001. New Regulations are required to implement the directive and supersede the existing Passenger Car Fuel Consumption Order 1983. These Regulations will mandate the following; a new format of fuel consumption label including CO2 emissions information, the display of a poster in showrooms listing fuel consumption and CO2 data for all car models in a manufacturer's range and the inclusion of fuel consumption and CO2 data in promotional literature.

Options

Identifying the options

The directive is mandatory and the UK is therefore obliged to implement it. We do have some flexibility regarding the format of the label which Member States are required to standardise within their own territory. We have chosen to base the label format on the voluntary label already developed by the Society of Motor Manufacturers & Traders. Existing UK primary legislation does not allow DTLR to mandate information on the label additional to that specified by the directive e.g. drive-by noise level, local pollutant emissions standard etc.

Issues of equity or fairness

The directive will apply to all car manufacturers and dealers selling new, type-approved vehicles in the UK. Vehicles outside the scope of type approval are not affected by the directive e.g. low volume manufactured vehicles and vehicles approved via the Single Vehicle Approval scheme. There is no basis in primary legislation to incorporate non type approved vehicles into the scope of the regulations even where appropriate fuel consumption and CO2 data exist.

Benefits

Identifying the benefits

Provision of consumer information on fuel economy is a potentially useful tool with which to influence consumer demand towards more fuel-efficient vehicles. It could also provide an added incentive to manufacturers to produce vehicles with lower fuel consumption. Consequently, the Commission argues that fuel economy labelling is an integral part of the wider strategy for reducing new car CO2 emissions. By encouraging buyers to switch to more efficient cars, improved information on fuel consumption could help to secure the benefits of the other elements of the new car strategy, such as the voluntary agreement with motor manufacturers.

The Commission suggests that the EC strategy on CO2 from cars is a package, of which fuel labelling is a part. Fuel economy is only one of many factors that influence purchasers' choice of cars, and a fuel economy labelling scheme is only likely to produce limited downsizing of cars purchased. However, since fuel consumption of similar size cars can vary by as much as 45%, improved information on fuel consumption is more likely to be effective in encouraging a car buyer to purchase a more fuel efficient car within a given size category. Nevertheless, fuel consumption and CO2 emissions labelling is expected to have a smaller impact on fuel consumption than, for example, the voluntary agreement with manufacturers.

It is extremely difficult to quantify the economic benefits of the fuel labelling scheme required by this directive. Where countries such as the UK already operate fuel economy information schemes there has been very little work on isolating the impact of the scheme from wider changes going on in the new car market. Consequently , the Commission has not attempted to separate the benefits of the fuel labelling scheme from those expected from the rest of its new car strategy.

The Regulations also provide a benefit in supporting UK Graduated Vehicle Excise Duty and Company Car Taxation schemes, both of which will use a car's CO2 emissions to determine the level of taxation to which it is subject. The Regulations therefore benefit consumers by providing the data for them to determine their potential tax liability.

Quantifying the benefits

The Commission argues that the provisions of the directive are an integral part of its strategy to reduce car CO2 emissions. Overall this is intended to achieve the CO2 emissions target for new passenger cars of 120g/km by 2010, this compares to an estimated average level of 186 g/km in 1998.

Compliance costs for businesses

Business sectors affected

The regulations will affect car manufacturers and new car dealers. However as the UK already operates a similar scheme the additional burden on these sectors will be minimal.

Compliance costs for a 'typical' business

The UK already has a very similar fuel consumption labelling scheme in place. Car dealers are already required to show labels on the new cars they have on display, detailing the official fuel consumption data for that model of car. The new regulations implementing the directive will require the addition of CO2 emissions information and a significant change to the format of the label. This information will make the labels more informative, but should not add significantly to the cost of the scheme. Production and distribution costs should be unchanged, for dealers complying with the existing requirements.

In the UK, manufacturers already need to include official fuel consumption data (in both metric and imperial units) wherever promotional literature refers to the fuel consumption of a vehicle. Under the requirements of the directive, manufacturers, and dealers where appropriate, will need to include this data in all promotional literature they produce for specific models of cars, even when fuel consumption would not otherwise be mentioned. Production and distribution costs will not be affected, but there will be a small one-off cost to the manufacturer in revising existing material. Industry have also pointed out that the requirement to include fuel consumption and CO2 emissions data in advertisements will decrease the effectiveness of advertising, but have been unable to provide any data to quantify this effect. It is estimated that the motor industry's total annual spend on press advertising in the UK is around £220 million. If the directive were to be interpreted and enforced as requiring fuel consumption and CO2 data to dominate advertisements much of this expenditure could be undermined.

Data obtained from the SMMT estimated production and distribution costs for a typical manufacturer to be £24,000 per year for the label and £12,200 per year for the poster. This does not account for the fact that some of these costs are already incurred by those complying with the PCFCO labelling scheme. It was not possible to obtain a reliable estimate of the costs of updating promotional literature.

Total UK compliance cost

The cost of producing a fuel consumption guidebook is borne by UK Government. Demand for recent issues of the fuel consumption and emissions booklet has been high, 430,000 copies of the booklet were produced in the last financial year. The current annual budget for this activity is £276,000, this includes the cost of maintaining a website of the data with monthly updates.

The total cost to UK Government, industry and businesses of producing and distributing labels, posters, guidebooks and promotional literature is estimated to be in the order of £1,832,600 per annum. This is a total cost, not a cost increase and does not account for the reduction in costs due to the PCFCO labelling scheme being superseded. In addition, if the measure is successful in reducing average fuel consumption of new passenger cars sold in the UK, motorists fuel bills will reduce. It is not possible to quantify this effect.

Impact on small businesses

The impact of the directive is on vehicle manufacturers and dealers. Manufacturers are required to supply fuel consumption and CO2 data to dealers and ensure that promotional literature meets the requirements. Dealers will be responsible for displaying labels and posters and handing out guidebooks, but in practice it is expected that manufacturers will supply labels and posters to dealerships in order to ensure presentation of a consistent corporate image. Small manufacturers are exempted under the low volume exemption from whole vehicle type approval. There is therefore negligible effect on small businesses.

Results of consultations

The Commission consulted with representatives from most Member States, the European Automobile Manufacturers Association (ACEA), Eurocommerce, the European Committee for Motor Trades and Repairs, the European Conference of Ministers of Transport (ECMT), the European Environment Bureau (EEB) and the European Federation for Transport and the Environment (T&E). The Commission suggests that the auto industry is favourably disposed towards the scheme as it believes fuel economy labelling will provide useful information to the consumer.

DTLR has consulted widely on draft Regulations to implement the directive. None of the organisations consulted were opposed to the principle of the mandating consumer information on fuel consumption and CO2 emissions. However some of the consumer and environmental organisations responding were of the opinion that the UK should be implementing a comparative, banded label (e.g. one rating cars from A to G based on their CO2 emissions) or that additional information should be mandated on the label. This is not possible since the regulations are made under the European Communities Act 1972 which gives powers to implement only the requirements specified in EU legislation. No other primary legislation exists under which a CO2 labelling scheme could be mandated. However DTLR will be consulting shortly on possible future developments on passenger car environmental labelling including comparative labels. Other consultees requested clarification over the intended meaning of the requirements for promotional literature. The Department intends to deal with this by means of a Guidance Note to enforcement authorities.

Summary

Directive 99/94/EC is a mandatory directive requiring Member States to ensure that fuel consumption and CO2 emissions data in a number of forms is available to prospective car buyers. DETR already publishes a booklet of new car fuel consumption and emissions figures which meets the requirements for guidebooks specified by the directive. In addition the Passenger Car Fuel Consumption Order (PCFCO) requires cars in showrooms to display a label with their official fuel consumption figures. UK regulations are needed to supersede the PCFCO to replace the old label with one compliant with the requirements of the directive (displaying CO2 data etc), to mandate the display of a poster of fuel consumption and CO2 data in showrooms and the inclusion of this data in promotional literature.

Enforcement

The UK already has a fuel labelling scheme in force. Local Trading Standards authorities have conducted some enforcement on this legislation, they also enforce the mandatory EU energy labelling scheme applicable to domestic appliances. For these reasons they are considered to be the most appropriate authority to enforce these Regulations. Active enforcement will be required, at least initially, to ensure that labels and posters are displayed in accordance with the new requirements. Once the measure is established the level of enforcement required should diminish.

Declaration

I have read the Regulatory Impact Assessment and I am satisfied that the balance between cost and benefit is the right one in the circumstances.

Signed by the responsible Minister

Date

Contact Point:
Chris Parkin, Zone 4/19, Department for Transport, Local Government & the Regions, Great Minster House, 76 Marsham Street, London, SW1P 4DR (Tel: 020 7944 2958, Fax 020 7944 2605)