core sector communique

• Car industry is trying to maintain a near status quo until 2015 and then improve marginally in 2020. Any laxity can seriously jeopardize energy security and climate mitigation plans

• Already steady increase in average car weight and engine size is inciting oil guzzling. India is at risk of losing its advantage in small cars that are oil sippers and not guzzlers.

• Car industry negotiating for lax targets is extremely disturbing at a time when country is bleeding to pay exorbitant rates for crude oil imports.

• The opportunity to avert the oil guzzling in the future must not be compromised.

New Delhi April 12, 2011: Centre for Science and Environment is deeply concerned about the inordinate delay in announcing the fuel economy standards and a labeling programme for cars. Even after nearly four years of policy discussions the proposed standards are under wraps with disturbing reports that the car industry is negotiating to dilute them.

Delay in announcing and implementing the fuel economy standards for 2015 and 2020 can seriously jeopardize energy security and climate mitigation plans especially given the unprecedented growth in car sales. Crude oil prices are peaking again and this can hurt India tremendously as it imports nearly 80 per cent of its crude oil needs. According to the International Energy Agency cars will be one of the primary drivers of energy demand in the transport sector in the coming decades.

“The concerned regulatory authorities must not endorse weak standards and get trapped into ‘too little, too late’, says Anumita Roychowdhury, CSE’s executive director-research and advocacy and head of its air pollution control team. The Bureau of Energy Efficiency under the Ministry of Power is setting the standards and the Ministry of Road Transport and Highways is responsible for implementing the standards. The new fuel economy standards will be set in terms of fleet average carbon-dioxide emissions target that will be sales weighted for all the new cars sold in a year. The CO2 target in gm/km will also be translated into fuel economy levels in km/litre. CO2 emissions depend directly on the amount of fuel burnt. The targets will be set for 2015 and 2020.

CSE demands immediate opening up of the proposed standards that are being discussed with the car industry for public scrutiny and discussions. “The government must inform people and all stakeholders about the fuel economy level of the new cars already achieved by the car industry during the year 2009-10 and 2010—11 and the improvement target planned for the year 2015 and 2020. Any decision based only on the discussions with the car industry can lead to serious conflict of interest” cautions Roychowdhury.

CSE’s rapid review of the available information exposes stark trends that the proposed fuel economy standards and a labeling programme must address.

What are the emerging trends and concerns?

Why is the car industry pleading for near status quo until 2015 and then an ineffective target for 2020? It has already been reported that the car industry is aiming for 135 CO2 gm/km in 2015, which is virtually a status quo. The available information shows that the average CO2 emissions from all new cars (sales weighted) in 2009-10 has been about 141 gm/km in India. This means minimal action – a mere 1 per cent improvement target per year. This will then further water down the targets for 2020 which is unacceptable. It should be noted that India has already agreed to reduce its energy intensity of GDP by at least 20-25 per cent by 2020. Therefore, the fuel economy improvement targets should at least align with this.

India can easily narrow the gap between its standards and the proposed European targets for 2020: There is no reason why India cannot narrow the gaps with the target that Europe has set for 2020. The average weight of the European car fleet today is 1300 kg and has average CO2 emissions of about 145 gm/km. In fact India is more advantaged as the average weight of Indian cars is still 1050 kg with an average CO2 emission of 141 gm/km now – better than Europe. If Europe can therefore propose a target of 95 gm/km in 2020, India should at least be below 105 gm/km in 2020. This can be easily achieved with 2.5% to 3% improvement a year.

Need immediate and effective targets as the steady shift towards heavier and bigger cars has blocked fuel economy improvement in India: During 2008- 2010, not only the car sales have increased, but also the average weight of the new car fleet has increased by 5 per cent and the average engine size by about 6 per cent. Due to these trends the fuel economy (km/litre) has stagnated and even declined by 1 per cent during the same period. This is unacceptable when the country is rapidly motorizing and reeling under energy crisis.

Without immediate regulatory action the fleet-wide fuel consumption will deteriorate soon: Estimates from other ongoing studies have shown that the current shifts towards bigger cars and SUVs and growing dieselization can lead to a cumulative loss of 6.5 mtoe of energy between 2010 and 2020. This equals the fuel use of all four-wheeled passenger vehicles in 2006 -- around 6.6 mtoe. Therefore, the new fuel economy standards should have built-in safeguards to attain effective fuel economy improvement by 2015 and 2020 that will offset the impact of increased weight of the fleet.

Enormous savings possible with effective targets: In fact, 2009 McKinsey report on India has estimated that if India improves fuel economy by even 15% by 2015 then India will save 29 million tones of CO2 in 2030. This translates into 10.3 million tons of oil equivalent which at 100 dollars per barrel works out to be 7.8 billion dollars of savings in 2030 alone. If this fuel savings is linearly increased from 2010-2030, the total fuel savings can be approximately 100 million tones of oil equivalent, and the cumulative dollar savings around 78 billion dollars. Thus any further delay can cost hugely to the nation.

Feasible and cost effective technology options exist to achieve these targets. As an emerging auto hub the investments in the automobile sector will have to be driven by the stringent targets. Other governments including China in Asia are tightening the targets further. India must not get left behind in the race and maintain status quo on this critical environmental issue.

CSE demands public discussion before finalisation of the standards: The nation will have to be on guard against weakening of targets. BEE and the Power Ministry must engage all stakeholders before finalizing the standards. Officially declare the proposed targets, the current baseline from which the target improvement is being planned.

Declare the enforcement strategy for the standards and the vehicle sales data: The car industry has pushed for a CO2/fuel economy standard that will have to be met as a weighted average of all car sales in a year. This means every year the regulator will have to assess the actual number of cars sold for each model and make in that year and calculate their average CO2/fuel economy levels. This requires very disciplined and credible reporting of fuel economy data as well as the exact number of sales of cars of each make and model in a year. Currently, the car industry has begun to declare the fuel economy data for car model and make. But there is no official system of reporting sales data by make and model to enable independent assessment of actual performance. The government must make the sales data public immediately along with the draft notification so that the actual sales figures are transparent to assess the targets and compliance.

CSE demands:

• The government must immediately issue the draft notification on the proposed standards for 2015 and 2020 for public consultation and discussion,
• Declare the current average CO2 emissions and fuel economy level of the new car fleet of 2009- 10 and 2010 -11 and demonstrate the target improvement planned with the proposed standards
• Declare the magnitude of cumulative fuel savings and CO2 reduction planned with the proposed standards in 2020 and 2030
• Make the sales data for all car models and make public for all to see and assess the sales weighted average of CO2 emissions per km and the fuel economy in litre per km which is the key parameter of estimating the new standards.
• Transparency in sales and fuel economy/CO2 data for cars is most crucial to understand the current levels and the improvement planned.
• Detail out the compliance strategy and the penalty that the car companies will have to pay if they fail to meet the target in any given year.
• Fuel economy standards should take into account the energy and carbon content of the fuels.