Looking for a European Regulation on CO₂: Lobbying Through National Examples (1991–1996)

In March 1991, German Environment Minister Klaus Töpfer announced that average fuel consumption in Germany would be reduced to 5 L per 100 km by 2005, equivalent to 120 g of CO₂ per kilometer (g CO₂/km).Footnote ³⁰ This target was then taken up by the Franco-German Environment Council in 1992, and then by the Environment Ministers of the Member States at their meeting in December 1994. They asked the European Commission to study the feasibility of reducing emissions from new cars to 120 g. Debates raged within the Commission itself, between the Directorate-General (DG) for the Environment (DG XI) and DG Industry (DG III): Should the EU favor a top-down approach and impose strict measures on industry, or should it adopt a more incentive-based, horizontal approach? DG XI advocated formal measures, such as taxes or sanctions, while DG III wished to pursue exchanges with industry, in a collaborative rather than coercive mode.Footnote ³¹ In 1992, DG XI’s proposal to include CO₂ emissions in an annual road tax was rejected by the Member States, especially the United Kingdom. They refused to give the EU this regalian power, and the producer countries wanted to avoid hampering the renewal of the car fleet.Footnote ³² It was a victory for DG III, which wanted to keep a firm grip on automotive issues. Since 1989, it had been headed by Martin Bangemann. As former Minister for Industry in Germany in the 1980s, he opposed his counterpart in charge of the environment and defended the point of view of German manufacturers, who refused to let Germany go it alone in Europe on very strict antipollution standards.Footnote ³³ When he joined the European Commission, Martin Bangemann was keen to use automotive policy to strengthen his position and that of DG III within the Commission. For example, Samuel Klebaner considers the Auto Emissions 2000 symposium (1992) on antipollution standards to have been a way for DG III and Bangemann to legitimize a new regulatory method: encouraging innovation to make the EU the world leader in clean engines.Footnote ³⁴ More broadly, beyond environmental issues, Martin Bangemann used automotive issues at the turn of the 1990s to assert DG III’s role in opening up the single market and, above all, the project of a liberal Europe—as demonstrated by his position on Japanese car exports, an issue he described as a “test case” for the EU.Footnote ³⁵

Although the first attempts to regulate CO₂ in Europe failed, the “shadow of hierarchy” was nonetheless there, prompting companies to take the initiative to avoid the threat of severe regulation.Footnote ³⁶ The automotive industry in several countries proposed voluntary commitments to reduce emissions (Table 2). Science historian Dominique Pestre describes a shift at the turn of the 1990s “towards the appropriation of the environment by the business world.”Footnote ³⁷ In October 1991, the European automobile lobby, ACEA, publicly committed to reduce the CO₂ emissions of each of its members by 10% between 1993 and 2005.Footnote ³⁸ A few days before COP1 in Berlin, on March 23, 1995, the Verband der Automobilindustrie (VDA)—the association of German automobile companies—pledged that its members would reduce their CO₂ emissions by 25% between 1990 and 2005 for vehicles sold in Germany. As this deal met a political and social demand, the commitment was made “under the watchful eye of the Administration.”Footnote ³⁹ Environment Minister Angela Merkel acknowledged the initiative at a press conference with VDA President Erika Emmerich. ACEA decided to go further in 1995, promising a 15% reduction by 2005 “after difficult discussions” between CEOs.Footnote ⁴⁰ Unlike the VDA’s commitment, however, this was a position taken “exclusively from a lobbying perspective”: “there would be no advantage in making the ACEA commitment subject to a strong public statement. On the contrary, such an ACEA commitment should exclusively be used for face-to-face ACEA lobbying European institutions in Brussels.”Footnote ⁴¹ The manufacturers wanted to defend the idea that “this commitment constitutes the maximum the industry [was] able to achieve and that no further commitments going beyond this threshold [would] be possible”—even though the target set was well below the VDA’s commitments.Footnote ⁴² By adopting a stalling tactic on this figure of 15% by 2005, the industrialists hoped to temper the Commission’s environmental ambitions at a time when this institution was due to present a strategy for reducing car emissions. DG Environment, for its part, had not given up on traffic taxes. A new proposal was submitted to the Council in May 1995, with no more success than in 1992.

Table 2. Council Target and Industry Commitments between 1995 and 1997

Source: Author’s compilation.

* Note: The value in brackets is the old or new test equivalent of the one mentioned officially.

In the Spring of 1996, PSA and Renault were about to conclude a voluntary agreement in France, in reaction to that of the German VDA. At this time, PSA emitted 153.3 g CO₂/km and Renault 159.6 g CO₂/km. Negotiations with the Ministries of Industry and Transport resulted in a target of 150 g CO₂/km by 2005, based on the CO₂ measurement test in force within the EEC since the 1970s. A new CO₂ measurement test had been created in 1993 to take account of a cold-start period, but only came into force in 1997. As a result, measured CO₂ levels were artificially increased by around 9% compared with the old cycle: 150 g under the old test corresponded to 163.5 g under the new test. French automakers also referred to the government’s commitment to achieving 120 g CO₂/km by 2010, but it was not enough for the Environment Minister: “It’s clear that everyone agrees with our text, except Mrs Lepage,” PSA deplored. She wanted “a more binding reference to the 120 g target.”Footnote ⁴³ PSA and Renault therefore added that, for 2005–2010, “it will be examined whether the 120 g/km level mentioned by the public authorities is compatible with the development of the automotive market, regulations and the progress of economically acceptable technologies.”Footnote ⁴⁴ The target was therefore introduced conditionally and without obligation. In fact, the companies felt that it was “totally unreasonable, in the opinion of both German and French manufacturers.”Footnote ⁴⁵ French carmakers argued to their government that it was against the opinion of its national champions and under pressure from environmentalists that the German administration was pushing for 120 g CO₂/km. This assertion should be treated with caution, since, on the one hand, scientific literature has tended to emphasize “Germany’s willingness to improve stringent fuel economy regulations” because of its exports to the American market.Footnote ⁴⁶ But on the other hand, German manufacturers in the 1980s half-heartedly rejected the antipollution standards that their government wanted to impose in Europe—despite the technological lead they had (catalytic converters) and the benefits this gave them in the US market.Footnote ⁴⁷

Although the 150 g French objective and the −25% German objective were fairly equivalent in practice, there were still differences between the two agreements. Renault and PSA claimed that their commitment was “the most courageous in the world,” as the VDA commitment “was not binding on individual manufacturers. This made it very difficult to monitor.”Footnote ⁴⁸ It was a collective commitment: Some companies could do better than −25%, and others worse, to reach a balance point. The automotive sector in Germany was much more contrasted. It included both generalists such as Volkswagen (175 g in 1995) and specialists such as Daimler-Benz (208.8 g) or Porsche (270.3 g), which emitted much more. Why did the Germans prefer to express targets in percentage terms and the French in absolute figures? In Germany, taking the 1990 CO₂ peak as the reference year—“as if by chance” the French companies said ironically—led to a more impressive drop.Footnote ⁴⁹ For Renault and PSA, whose fleets emit the least CO₂, a 25% reduction was conversely more difficult to achieve than an absolute target of 150 g (−6% for Renault and −2% for PSA).

Renault and PSA committed themselves on September 4, 1996, without the support of the Environment Ministry, but considering that “they [the Ministry’s officials] will not be in a position to deny that this commitment was made ‘under their watchful eye,’ as in Germany.”Footnote ⁵⁰ The situation was urgent. They hoped their initiative would influence negotiations between ACEA and the Commission, as well as discussions between Environment Ministers: “It is important for France to be able to state a position in the face of a German position, which is the only one to have been formulated so far, and which risks influencing many other Member States. […] There is an urgent need for a Franco-French agreement so that the success of our approach—using reasonable figures and absolute values—can be reported.”Footnote ⁵¹ The French voluntary agreement was primarily intended to influence European regulations and catch up with Germany’s lead. French automakers wanted to promote their position on the CO₂ issue to other stakeholders: the Commission, Member States, and automakers within ACEA. In the first half of 1997, other manufacturers took voluntary action. Swedish manufacturer Volvo duplicated the German commitments: It would reduce the fuel consumption of its vehicles sold in Europe by 25% in 2005, compared with 1990 levels.Footnote ⁵² Fiat and the Italian government aimed for an average emission of 145 g CO₂/km in 2005 (132 g under the old test), on condition that the share of diesel reached 40% thanks to incentive mechanisms.Footnote ⁵³ In short, when the Commission asked ACEA in 1996 to make a commitment on behalf of European manufacturers, its own members had already taken isolated initiatives. Ultimately, most of these agreements were designed precisely to influence future European regulations.

European Industry Divided and Reluctant: Negotiations at a Standstill (1996–1997)

At the end of 1995, the Commission proposed a three-pillar strategy to tackle CO₂ emissions from cars: a framework for fiscal measures and a fuel economy consumer information scheme, both supported by DG XI, and a voluntary agreement supported by DG III.Footnote ⁵⁴ The automotive sector became a pilot for a new, less coercive and more liberal approach, as PSA’s representative in Brussels emphasized in 1999:

At the same time, the Commission was preparing its first communication on voluntary environmental agreements to provide a framework at the European level. On March 1996, the Environment Ministers broadly supported the possibility of an agreement with industry, and then confirmed in June the target of 120 g CO₂/km by 2005, or 2010 at the latest—thus adding a further five years. Although the negotiations that led to this five-year extension have left no trace in the archives studied, it may be seen as the probable mark of effective lobbying by the industry with the Commission and the Member States.Footnote ⁵⁶ The Commission was then mandated to negotiate with the industry. It officially asked ACEA to prepare a proposal, in a letter that Martin Bangemann (DG III) and Ritt Bjerregaard (DG XI) published, as they said, “for the sake of transparency.”Footnote ⁵⁷ The voluntary commitment was clearly a Commission’s initiative: “ACEA has taken note of the Commission’s wish to conclude an ‘agreement’ with the automotive industry, the legal form of which remains to be defined.”Footnote ⁵⁸ The idea, expressed by Julia Heldermeier for example, that ACEA maneuvered the Commission into accepting a voluntary commitment seems far from the case.Footnote ⁵⁹

On the contrary, manufacturers were initially reluctant to conclude a voluntary agreement. They felt that “the exercise the Commission [was] asking them to do was very complicated.”Footnote ⁶⁰ Companies had been rejecting the 120 g target for years. At the end of October, an ACEA delegation met Martin Bangemann to argue that there was an “impossibility to comply with 120 g in 2005 and even not in 2010.”Footnote ⁶¹ They questioned the compatibility of CO₂ targets with regulations on pollutant emissions, road safety, and noise. Even if the Commission assured that the CO₂ measures would apply to their Japanese and Korean rivals, they were worried about distorted competition in Europe and deplored the fact that “the USA and Japan, for their part, did not seem to be as proactive.”Footnote ⁶² But Japan was active in the 1990s following the Rio Summit and adopted a new gasoline car fuel economy target for 2000 in 1993, soon followed by other regulations (1996, 1998, and 1999). Masahiko Iguchi explains that, along with Europe, Japan has the strictest standards on CO₂.Footnote ⁶³ By contrast, the United States lagged behind in the 1990s. Although the United States was the first automotive country to commit to environmental standards (Clean Air Act in 1955, Energy Policy Conservation Act of 1975, and Corporate Average Fuel Economy standards in 1978), US regulations at the federal level (and not at the state level) stagnated until the mid-2000s. In sum, manufacturers were not very enthusiastic: “Wouldn’t it be better to stick to national agreements?” asked the ACEA President to DG III in 1996.Footnote ⁶⁴ To motivate manufacturers, Martin Bangemann said he was “prepared to re-consider, if needed, the target of 120 g if the industry can demonstrate the technical impossibility to comply with such a target, as well as the economic consequences, if it had to be implemented.”Footnote ⁶⁵ The industry’s archives reveal a major point not made in interviews and published documents: DG III was ready from the outset to abandon the 120 g target. DG III took a conciliatory stance as a partner concerned with the interests of the industry, stating at the meeting with ACEA that “the Commission was also conscious that the industry must produce cars which are accepted by the market.”Footnote ⁶⁶ The companies did not have the same support from DG XI. At the same time, DG XI pursued its strategy of fiscal measures (“higher transport prices—at least in some cases—are an essential element in an effective strategy for reducing CO₂ emissions”), hoping to reduce traffic (“addressing transport CO₂ emissions by definition implies addressing traffic growth”).Footnote ⁶⁷ For European manufacturers, DG XI’s discourse was either “medieval or Ice Age” style.Footnote ⁶⁸ They angrily noted that “this time, the summum has been reached.”Footnote ⁶⁹ Fearing that DG XI would carry out a program that could reduce the car’s importance in society—and therefore their sales—the automakers agreed to make a proposal to DG III, as the latter was prepared to give up the 120 g—despite the Member States’ initial mandate (Table 3).

Table 3. The Different Regulation Proposals in 1996–1997

Source: Author’s compilation.

ACEA’s offer in 1997 consisted of CO₂ measures in a give-and-take logic. ACEA proposed a target of 155 g CO₂/km by 2005. It represented a drop of 9.5% compared with 1995. ACEA negotiated with the old test, even though the new, stricter test had come into force in January. Perhaps automakers thought the environmental targets would look more ambitious that way. ACEA’s automobile CEOs negotiated a confidential burden sharing with each other. Generalists were to have a target of 150 g (taken from the German and French agreements), while specialists Porsche, Daimler-Benz, Volvo, and BMW were to reduce their emissions by 15%.Footnote ⁷⁰ This burden sharing was deliberately not communicated to the authorities. ACEA stated that 155 g was “a substantial contribution, far beyond Business as Usual,” as other new regulations—safety, pollutants, and noise—could make vehicles heavier and increase the emission level to 192 g CO₂/km in the years to come.Footnote ⁷¹ The 120 g target was described as unstainable: “Although it is technically feasible to produce a 120 g or less car, an average fleet level at this level would not be accepted by the market, as the cars offered will not respond to the expectation in terms of customers’ utility, affordability, safety and other environmental objectives.”Footnote ⁷² The industry stressed the socioeconomic issues, unwilling to deny that 120 g was technically possible. The first emission-free electric vehicle was presented as early as the end of the nineteenth century.Footnote ⁷³ In the 1990s, California’s low-emission vehicle (LEV) regulations required all carmakers to include 2% zero-emission vehicles among sales in the state by 1998, rising to 10% by 2003. Consequently, what mattered was not so much what was actually technically feasible but rather the stakeholders’ perception of what was “technically feasible” (in terms of affordability or performance, for example)—technological feasibility being therefore both a technological and a socioeconomic construct. ACEA also asked the Commission for counterparts: compatible standards, availability of certain fuels, preservation of the diesel car share, a broader approach to the CO₂ problem (reducing traffic jams or improving road infrastructure), and substantial support for research and development (R&D) initiatives.

ACEA’s proposals were rejected by the Commission because they fell far short of the Council’s requirements: 155 g CO₂/km “does not represent any particular effort on the part of the automobile Industry, but at best is merely ‘business as usual.’”Footnote ⁷⁴ The Commission considered all national commitments to be more courageous. It was fully aware that ACEA aligned itself with the lowest common denominator among its members, explaining that “manufacturers in the different Member States [could not] agree on what each manufacturer should contribute to the overall industry target.”Footnote ⁷⁵ In response, the Commission was threatening: “If an agreement fails […], the target-sharing will no longer be decided BY the industry itself but FOR the industry in the European Union’s legislative process.”Footnote ⁷⁶ To increase the pressure, it also pointed out that “European Parliament has already suggested […] to move towards limit values.”Footnote ⁷⁷

As the threat of a CO₂ directive intensified in the winter of 1997, the industry was undermined by internal divisions. German automakers feared a system that would bind each company individually and be associated with sanctions: “The Commission wants to bind such an approach to a sanctions mechanism—if necessary a fiscal one—so as to be able to apply pressure on every individual manufacturer to fulfil the reduction goal, and to have an instrument with which to identify ‘black sheep.’”Footnote ⁷⁸ In 1997, the biggest CO₂ emitters in Europe were German specialists Porsche (264 g under the new test), Daimler-Benz (222 g), and BMW (200 g), and Swedish company Volvo (222 g).Footnote ⁷⁹ They felt that noncollective commitment could stigmatize them. The VDA therefore insisted on a “collective commitment” and a “collective monitoring”: It wanted “the EU Commission to entirely give up on the idea of manufacturer-specific monitoring, and instead supervise the progress achieved entirely on a collective basis, analogous to the procedure practiced in the Federal Republic.”Footnote ⁸⁰ The VDA repeatedly stressed that “this target should be expressed in relative terms,” even if, “off the record, the absolute values […] could be explained to the European Commission.”Footnote ⁸¹ In a word, the VDA wanted to duplicate its own agreement on a European scale, proposing a collective reduction of 20–25% in emissions between 1995 and 2010. For the French carmakers, who highlighted the phrase “in relative terms” with a pen each time it occurred, “it really [smelled] like a trap,” as one PSA executive summed up—an opinion shared by Louis Schweitzer, Renault’s CEO.Footnote ⁸² The German lobby urged ACEA to make a new offer: “ACEA must act quickly to avoid official regulation of the CO₂ reduction process […]. Mere stalling is no longer sufficient. New constructive proposals by the automobile industry are necessary.”Footnote ⁸³ However, this was in “absolute contradiction” with the conclusions of the last meeting of ACEA CEOs, who had agreed on a blocking position on 155 g CO₂/km.Footnote ⁸⁴ Academics have clearly shown that the industry’s power in the decision-making process depends on its ability to speak with one voice.Footnote ⁸⁵ With this in mind, the carmakers had decided to reform their association in 1991 and adopt qualified majority voting at a time when their deep divisions over the Japanese exports, combined with unanimous voting, were paralyzing their lobbying efforts.Footnote ⁸⁶ A few years later, the CO₂ issue showed that internal rivalries nevertheless continued to weaken the industry’s voice, as interests diverged depending on the cars produced by each company.

In the autumn of 1997, French automakers were furious when they heard of the VDA’s maneuvering with the Commission. Automotive lobbying in Brussels is far from homogeneous, with national association strategies sometimes competing with—or even sabotaging—ACEA’s work so as to defend more national interests. One document “was leaked by Ford, which doesn’t like the VDA’s position,” and then grabbed by ACEA’s Director of Parliamentary Affairs, who passed it on to PSA and Renault.Footnote ⁸⁷ A senior PSA executive called it “an absolutely incredible document”:

This solution put French firms at a disadvantage compared with German ones. The French would have to choose between a formula modelled on the 1995 VDA agreement—so conceived for the biggest CO₂ emitters—and a formula considered by all manufacturers to be totally unrealistic (120 g). For generalists, the two options didn’t present such major differences as for specialists. In the case of PSA, −25% meant 115 g under the old test and 125 g under the new one, i.e. a target quite close to 120 g.

Against this extremely tense backdrop, ACEA finally decided to postpone the discussions, as the Kyoto conference was due to start in December 1997. The international meeting increased the pressure: “Already the minds of decision-makers are heating up as the planet warms and political pressure rises along with water levels” said a lobbyist.Footnote ⁸⁹ The commitments made by EU institutions in Kyoto worried the automotive sector, which considered its responsibility for CO₂ emissions to be overestimated: “Our industry cannot of course solve the problem alone.”Footnote ⁹⁰ This recurring victim position, part of lobbying tactics, could also be seen in the debates on acid rain in the early 1980s and on road safety since the 1970s. If, according to Keetie Sluyterman, Shell’s post-Kyoto discourse was much more voluntary, this is due to the fact that the position of companies is often more proactive than that of associations.Footnote ⁹¹ The latter lobby on behalf of the entire sector and align themselves with the least committed company.Footnote ⁹²

At the end of 1997, the situation was critical for automakers. The Commission and Council had rejected ACEA’s offer, German and French manufacturers were particularly divided, the EU had strengthened its CO₂ commitments on the world stage, and the threat of regulation was looming. PSA’s delegate in Brussels was alarmed by the situation, claiming that the automotive industry would be the “star” of the June 1998 Council.Footnote ⁹³ He explained that in this scenario, “DG XI’s admitted difficulties in drawing up a directive on the subject would therefore be overlooked” and that “it will no longer be up to the car industry to decide, but it will be decided for it, and the position of the European Parliament should be recalled: 90 g/km.”Footnote ⁹⁴ At the time, 90 g was seen as a possible target, especially given California’s legislation. Academics confirm that there has been a “California effect” on both the Japanese and European trajectories—even though the contribution of this regulation to improving fuel economy in California is unclear.Footnote ⁹⁵ Policy-makers have benchmark technologies in mind when drawing up regulations, such as the catalytic converter in the 1980s, which sometimes leads to a “convergence” of standards.Footnote ⁹⁶

The Council, for its part, insisted on the 120 g target. Several states were “showing signs of annoyance at the stagnation of the file and the figure proposed by ACEA. ‘Don’t expect these countries to settle for 130 g/km,’ they warned. That leaves plenty of room for negotiation!” ironized PSA’s executive.Footnote ⁹⁷ While ACEA proposed 155 g CO₂/km, even 130 g would already seem too much. And moreover, were the Member States fully aware that the industry was talking on the basis of the old test (so 155 g meant 169 g under the new test)? The difficulty of comparing targets due to the change in emissions calculation methods was surely part of the players’ strategies, as several studies have highlighted the political and economic implications of various constructions of emission standards.Footnote ⁹⁸ Austria, which intended to push this issue forward under its presidency, imposed the idea of “setting March 98 as the deadline for reaching an agreement with the industry.”Footnote ⁹⁹ After this time, the Commission was to rapidly present a directive proposal. This left the car industry with just three months to pull together and revise its position to avoid a formal directive—and hence parliamentary intervention. And it has been clearly demonstrated by Laurent Warlouzet that Parliament succeeded in influencing antipollution standards at the end of the 1980s, even before the co-decision procedure was introduced.Footnote ¹⁰⁰

Manufacturers Fall in Line with Commission’s Views (1998)

ACEA worked on a new proposal in January and February 1998, even though carmakers still had doubts: “General Motors would prefer a voluntary agreement to a legislation, but the political situation is so unclear that the automobile industry should be very careful in committing a very low voluntary agreement which is not feasible respectively only with extremely high costs.”Footnote ¹⁰¹ As DG III had invited ACEA from the outset to argue that 120 g CO₂/km was unfeasible, the lobby urgently hired an external consultant, Arthur D. Little, to carry out an evaluation of the economic and social impact of a 120 g CO₂/km standard on all ACEA members. The aim was to “build-up a communication tool,” using extensive economic analysis.Footnote ¹⁰² Another ACEA note pointed out that car companies should use this study to convince their national and regional authorities that “too tough CO₂ targets would drive industry into an unsustainable loss situation.”Footnote ¹⁰³ According to that study, the 120 g CO₂/km scenario would “fundamentally change the fleet segmentation, the industry structure with dramatic consequences for the EU economy as a whole, and for several regions in particular.”Footnote ¹⁰⁴ It would lead to a drop in sales of medium-sized cars, a dramatic deterioration in margins, and the end of the large car market—which could cause plant closures in southern Germany, the United Kingdom, Sweden, Portugal, and Austria and threaten 700,000 jobs. The study sketched out a truly catastrophic scenario that would have a “devastating negative effect on the EU economy.”Footnote ¹⁰⁵

At the same time, the Commission was preparing the first proposals for a directive, which it presented to the industry at the “CO₂ and Cars” workshop held in Strasbourg on February 18, 1998. Companies came under considerable pressure. Generalists and specialists alike were worried by the proposals, which included national tax incentives for very low-consumption vehicles, financial penalties for models exceeding a certain energy consumption threshold, and even trade bans. The standards would be “specified by vehicle class and not for the entire range, to avoid ‘killing off’ the specialists.”Footnote ¹⁰⁶ PSA, Renault, and Fiat felt that a regulation was not in their favor: A standard covering all car categories could surely be less stringent than a specific standard for cars that were already the lowest CO₂ emitters. German specialists feared becoming “black sheep” in the eyes of the Commission and consumers, or even the target of future tax sanctions.Footnote ¹⁰⁷ Porsche, which was the biggest CO₂ emitter, said in Strasbourg that such measures would destroy it. The Strasbourg workshop was an electroshock for the manufacturers: “We must move towards finding an agreement, which seems to be the position of all ACEA members.”Footnote ¹⁰⁸ They all dreaded the examination of a directive by deputies: “The intervention of the European Parliament makes it uncontrollable,” said Renault.Footnote ¹⁰⁹ A consensus emerged among generalists and specialists alike. The Commission had given a minimum target in Strasbourg on which it could not compromise—140 g CO₂/km (new test)—and so they had to stick to it. The Strasbourg workshop was a pivotal moment in the negotiations. On the one hand, the threat of regulation had never been felt so strongly and seemed to be taking shape, and on the other hand, the foundations of an agreement were clearly established.

On March 10, 1998, new ACEA Chairman Bernd Pischetsrieder (BMW) submitted a 140 g CO₂/km target to the Commission and used the Arthur D. Little’s study to defuse the dispute over 120 g CO₂/km. Following the Commission’s lead, ACEA stopped using the old test. This new proposal was broadly accepted by the Council a few days later, although the Member States asked the Commission to continue discussions with the industry.Footnote ¹¹⁰ At the time, nothing was certain, and in April the British government was considering domestic targets for CO₂ in case the agreement at the European level failed.Footnote ¹¹¹ ACEA’s proposal ultimately resulted on July 29 in a five-page commitment to 140 g CO₂/km within 10 years, in 2008 (versus 186.5 g in 1995 and 178 g in 1998). By 2003, a first stage of 165–170 g CO₂/km should have been reached, and the possibility of a reduction to 120 g CO₂/km by 2012 would then be examined. A fiscal framework and a consumer information scheme were also intended to help the industry achieve the 120 g target. ACEA’s commitments were backed up by requests: a similar commitment for non-ACEA manufacturers, action to ensure that other producer countries make equivalent efforts on CO₂, and, finally, under the guise of encouraging certain technologies and without making it explicit, no hindrance to diesel vehicles. If ACEA’s commitments were not clearly and explicitly conditioned by these elements, the lobby set up possible means of demonstrating why, in the event of failure in 2008, it had not succeeded in meeting the objectives.

Did ACEA’s commitment result in low standards for automakers, or was it a “brave” agreement, as the industry put it?Footnote ¹¹² Environmental NGOs and early academic observers considered this a “technically unambitious” commitment.Footnote ¹¹³ No guarantees were given regarding the target of 120 g CO₂/km (mentioned twice). The reference was purely strategic: “The 120 g target must be included in the proposal; it’s a political fact of the matter,” said Renault in February.Footnote ¹¹⁴ PSA and Renault had chosen this option in France in 1996—a further indication of the influence of French manufacturers that may have been underestimated. The 120 g target had become such a political figure in the 1990s that it was used by stakeholders regardless of whether they were talking in terms of the old or the new test, even if there was a 9% difference. As the 120 g target was not binding, manufacturers accepted it.

The 140 g CO₂/km target was also, secondarily, expressed as a percentage: −25% compared with 1995. So the French and Germans each managed to impose the formula they preferred. PSA and Renault had thought of this dual solution as early as 1996. At that time, French industrialists explained that the fact that France and Germany were both aiming for 163.5 g in 2005, “far from being a disadvantage, actually put [them] on the road to a Brussels solution.”Footnote ¹¹⁵ Back then, they advocated setting a common absolute target, with “the freedom for each [country] to implement it as it sees fit, either as a percentage or in absolute terms.”Footnote ¹¹⁶ So, Julia Hildermeier’s idea that the 1998 European commitment “copies, not unintentionally,” the VDA’s commitment, and that Daimler and BMW “imposed their national position,” needs to be qualified.Footnote ¹¹⁷ French automakers succeeded in obtaining absolute targets, even before the relative value of −25% was mentioned. The “French preference […] became a foundation of Europe’s CO₂ reduction–driven nature of the fuel economy regulation for cars” also said Masahiko Iguchi.Footnote ¹¹⁸ PSA recalled in 1999 that “ACEA has defined a position in absolute figure.”Footnote ¹¹⁹ Only the absolute figures were even retained by the Commission in February 1999 to facilitate negotiations with Japan and Korea. DG XI even confirmed in 2003 that “it considered the commitment to be in grams.”Footnote ¹²⁰ So the agreement was not a victory for the German VDA over the French manufacturers. Nevertheless, the Germans manufacturers obtained what they considered vital and what the others also considered preferable, i.e. a collective commitment. The data transmitted by ACEA to the Commission for monitoring purposes were aggregated, without reference to individual company results. This was however an issue that every stakeholder struggled with.

The burden sharing provoked heated debate within the industry. Whereas ACEA’s initial offer of 155 g enabled a secret burden sharing, with some going further (150 g) and others dropping by 15%, this was not the case with the final agreement. The generalists refused to go any lower than 140 g to compensate for the emissions of the German specialists (and Volvo). Although the DG for Competition had made it clear that burden sharing was illegal, many believed that the manufacturers had secretly agreed to share the burden of emissions. In 2003, following a meeting with the DG Environment, PSA reported that Jim Currie “hadn’t imagined for a second that we had not thought about burden sharing.”Footnote ¹²¹ It was certain that the illegality of burden sharing “reinforced ACEA’s position of only giving an ACEA global value.”Footnote ¹²² But in fact, the automakers did not define burden sharing off the record. “This is a delicate subject, but we must avoid manufacturers artificially escalating it, as this could jeopardize an agreement,” wrote a Renault executive in February.Footnote ¹²³ Several documents confirmed this in 1999: “As the agreement is global ACEA, unless we embark on burden sharing, for which the idea of keeping it confidential ACEA is an illusion, it doesn’t seem relevant to us to have any value at ACEA other than the overall weighted average for all manufacturers combined.”Footnote ¹²⁴ A few months later, PSA criticized an ACEA document that listed percentage progress by company as leading “in the wrong direction, namely a monitoring by manufacturer, thus opening the Pandora box of burden sharing problem.”Footnote ¹²⁵ NGOs saw global monitoring as a strategy to hold back information and avoid more stringent targets in the future. Industry’s archives confirmed that private players considered the disclosure of individual data to be “dangerous”: “aid to the preparation of a segmented directive, the first step towards burden sharing,” i.e., a risk for all to see their efforts maximized by targets based on the type of cars and the level of the best performer in terms of low emissions.Footnote ¹²⁶ In 1998, however, hiding burden sharing was no longer a priority. The automakers felt it was even necessary to avoid burden sharing, so as to be able to join forces quickly and avoid a directive. Despite internal divisions and the foreseeable problems for monitoring, ACEA managed to act as a single block in a hurry. The text of the industry’s commitments was officially recognized by the Commission on February 5, 1999, in a recommendation addressed to ACEA. It was a “somewhat ‘atypical’ legal arrangement” because the Commission was not empowered by the Treaties to conclude agreements with private bodies.Footnote ¹²⁷

The next step was for the Commission to deal with the Japan Automobile Manufacturers Association (JAMA) and the Korea Automobile Manufacturers Association (KAMA). In April 1999, Honda, Mazda, Mitsubishi, and Nissan took part in a press conference in Tokyo on their environmental efforts.Footnote ¹²⁸ The ACEA representative in Japan suggested that journalists ask whether they could match ACEA’s CO₂ commitment. Nissan was evasive, and Mitsubishi, Honda and Mazda said it would be difficult to meet the commitment. They put forward other priorities such as improving fuel quality or reducing pollutant emissions. These were “very embarrassed” answers, according to PSA.Footnote ¹²⁹ As the Japanese and Koreans had not responded to DG III’s requests in 1996, the agreement had been negotiated between Europeans and in their own interests. In 1999, the main difficulty was that the Japanese and Koreans wished to reduce their emissions by 25%, while the Commission wanted to impose the 140 g CO₂/km limit. While the two options were equivalent for Europeans as a whole (and therefore included in ACEA’s commitment), this was not the case for the Japanese and Koreans. A 25% reduction corresponded to a less strict limit than 140 g CO₂/km. KAMA defended itself by saying that, unlike ACEA, it could not implement burden sharing, as it had too few members exporting to the EU. The Koreans also argued that they were going through a crisis and had neither the financial nor the technological resources to reach the 140 g CO₂/km target. The Commission retorted that they could buy technology from other manufacturers and, in any case, had no choice but to “volunteer.” Negotiations with JAMA were even more tense. Either the Koreans and Japanese committed themselves “voluntarily,” or they would have to comply with a directive. So they would have to adapt or leave the European market. The Koreans and Japanese agreed to 140 g CO₂/km within 10 years (2009).

An Overinfluential Automobile Lobby? The Strengthening of the Commission’s Power

A former member of DG Environment summed up the 1996 Commission position as follows: “Yes, environmental agreements can play a beneficial role and offer certain advantages […] No, voluntary approaches are not a substitute for legislation.”Footnote ¹³⁰ At first sight, however, the rules set by the automotive sector replaced a directive. ACEA stated it in the agreement: “As long as its commitments are being honoured, ACEA is assuming that this Commitment provides complete and sufficient substitute for all new regulatory measures […] or additional fiscal measures” on CO₂.Footnote ¹³¹ The commitments were not formally, clearly, or irrevocably binding on the manufacturers, with PSA referring to “a new partnership based on mutual trust”: “This type of agreement can, in this case, replace legislation, but the recommendation is not legally binding, and the recipients or persons it is aimed at are therefore not obliged to comply with it.”Footnote ¹³² In the 1990s, the Commission had already used soft law to regulate the automotive sector with the 1991 gentlemen’s agreement between the Commission and the Japanese Ministry of Industry.Footnote ¹³³ While work on the idea of a “shadow of hierarchy” reveals that the existence of hard regulation threats is important for ensuring the achievement of environmental goals, NGOs thought that, for the automotive case in 1998, the Commission had “not even prepared a binding legislative proposal—which could be an effective ‘stick’—to replace the voluntary agreements in case they should break down.”Footnote ¹³⁴ Industry archives reveal, however, that, even after 1998, companies feared a directive in the event of noncompliance:

The example of the agreement on safety reached with ACEA in 2001 shows just how real the threat was, since the voluntary agreement on pedestrian safety was finally transformed into a directive in 2003, as a preventive measure.Footnote ¹³⁶ But scholars underline the weakness of the “shadow of hierarchy” once self-regulation has been adopted in the environmental field.Footnote ¹³⁷ Even if companies did not feel they could escape their commitments, it was not until the end of the agreement in 2008 that the gap between the industry’s commitments and achievements was bridged by the adoption of a new, legally binding regulation.

So was the car lobby all-powerful? It seemed to have set the rules for a game in which it was both player and referee. It set the targets: 140 g CO₂/km, not 120 g CO₂/km. It kept a tight rein on monitoring the agreement by providing the aggregated data. The NGOs also pointed out that these data were compiled by agencies that, although independent, were regular clients of the automotive industry, such as the Association Auxiliaire de l’Automobile in France. They showed how the industry’s technical and informational monopoly weakened the Commission’s ability to monitor the agreement. The Commission “lacks adequate capacity and resources” according to a 2000 report published by EEB.Footnote ¹³⁸ Independent experts from NGOs such as EEB or the European Federation for Transport and Environment (T&E), who could have played a role, were never consulted. Back in the 1980s, the technical monopoly held by industry had already resulted in NGOs being de facto left out of negotiations on pollution standards.Footnote ¹³⁹ Should the 1998 voluntary agreement on CO₂ therefore be seen as a complete triumph for the automotive lobby in Brussels, which would set its own standards without being held to account? Were public authorities ultimately naive in entrusting the future of the climate to companies whose logic was above all commercial and financial?

Analysis of the industry’s primary archives suggests that the influence of the automobile lobby on the European CO₂ decision-making process in 1998 should be qualified, in terms of the genesis, content, and monitoring of the voluntary agreement. ACEA appeared quite passive and underpowered during the negotiation phase. The choice of a voluntary commitment rather than a directive was a decision made by the Commission, and met with a rather lukewarm response from manufacturers from the outset until February 1998. The first business-as-usual offer the industry made in 1997 was roundly rejected. It was because the Commission set 140 g CO₂/km as a level above which any proposal would be unacceptable and because it exerted strong pressure by evoking directive options that were far more threatening to the industry—tax penalties or even a trading ban—that ACEA voluntarily but reluctantly rallied behind the 140 g CO₂/km limit. While ACEA had originally proposed a 9.5% reduction in emissions, a few months later it finally accepted a 25% drop. Some observers may have minimized this reduction, forgetting that the first proposal was expressed in the old test (Table 4). Using the old test in 1997 backfired in 1998, as ACEA’s concessions appeared to be smaller with the switch to the new test. Similarly, ACEA had to stick to a 120 g target set in the early 1990s under the old test, even though 120 g in the new test was equivalent to 109 g in the old test. Moreover, the Commission did not commit to ACEA’s conditions, so companies were not assured of getting anything out of the agreement. On a broader level, ACEA was in trouble in the mid-1990s. In addition to the VDA’s independent moves in Brussels, years of blocking regulations had ultimately undermined its credibility. Independent experts were asserting themselves to public authorities, as demonstrated by the creation of the European New Car Assessment Programme (Euro NCAP) road safety group in 1996. By being “voluntary,” business actors hoped to improve their reputation.Footnote ¹⁴⁰ In 1999, ACEA stated the following: “The only way to restore ACEA’s image is to show our fierce willingness to work with the Commission on CO₂ monitoring.”Footnote ¹⁴¹

Table 4. Comparison between the two ACEA Proposals

Source: Author’s compilation.

The independence of monitoring was strengthened in 2000 when the Commission hired the European Environmental Agency. A similar loss of technical monopoly on road safety can be seen in the crash-test procedures designed by the European Experimental Vehicles Committee in the 1990s.Footnote ¹⁴² On emission standards, Mattias Näsman and Sandrine Pitteloud have clearly shown that corporate power was limited by governmental expertise when studying Sweden, Switzerland, and Europe until the 1990s.Footnote ¹⁴³ In the 2000s, the professionalization of T&E and its increased legitimacy in political circles contributed to the erosion of the industry’s technical monopoly.Footnote ¹⁴⁴ In 2005, T&E published its own independent report, focusing on the disappointing results (11.8%) and calling for economic incentives such as differentiated taxes based on car consumption: “What the Council and the Parliament need to understand is that the market is a good servant but a terrible master. To make the car market contribute fully toward sustainable transport, lawmakers need to be in command.”Footnote ¹⁴⁵

Yet industry archives reveal that it was the DG III that clearly had the upper hand in the negotiations. If the 120 g was not adopted, it was because the DG III did not really want it either. It encouraged the industry from the outset to argue that it was unfeasible. It was the Commission that set and presented the 140 g target in Strasbourg and threatened the manufacturers with a tougher directive to make them accept it “voluntarily.” Companies ultimately appeared to be more spectators than actors, following DG III, which seemed their best ally. While the DG III declared its liberal ambition to make relations between automotive stakeholders more horizontal, by involving industry more closely in decision-making, the voluntary agreements were used above all by DG III—which promoted them to the Council and industry—as a means of maintaining control over automotive issues within the EU, to the detriment of other public stakeholders.

Although interviewees for the report published by EEB described this episode as “an excellent example of inter-DG co-operation,” ACEA’s archives show the case in a different light.Footnote ¹⁴⁶ DG III sought to keep DG XI (Environment) away from automotive issues, as the sector has been under its control since the Treaty of Rome. In 1972, the newly formed automotive lobby sought recognition from Spinelli, Commissioner of DG III, and easily succeeded: DG III considered the association to be a valuable partner and a lever for building a competitive policy to challenge the United States.Footnote ¹⁴⁷ In 1996, Jacques Calvet declared: “DG III is our natural interlocutor and defender in relation to other Directorates-General of the Commission: DG IV (competition), DG XI (environment), DG XVII (energy) in the face of the many challenges we face”—a list to which we could add DG VII (transport), which at the same time was seeking to take over road safety issues.Footnote ¹⁴⁸ Regarding the Council, Member States seemed to take a back seat on the issue. The Commission obtained a target of 140 g, even though the Environment Ministers had warned the industry that they would not be satisfied with 130 g. Here, corporate lobbying at the national level has certainly played a major role. NGOs also expressed concern about the democratic process, as Parliament was not involved. Industry archives reveal that bypassing the Parliament vote was clearly a strategy of the Commission and the manufacturers, as they were convinced that, in the event of a directive, the Parliament would have asked for a stricter level than 140 g. The Parliament vote and the 90 g limit were regularly used as a threat by the DG III to remind the companies that they had more to gain from a voluntary agreement. This fear prompted the automakers to accept, as the best option, a voluntary agreement.

This strategy of bypassing both DG Environment and Parliament was not isolated. Axel Friedrich, Matthias Tappe, and Rudiger Wurzel demonstrated the same idea by studying the Auto-Oil Programme on pollution standards launched in 1992.Footnote ¹⁴⁹ About this issue, Jacques Calvet (PSA) summed up the words of Stefano Micossi, Director General of DG III: “the European Parliament is not controllable; it would be desirable for there to be a solid agreement between the Commission and the manufacturers in order to limit the damage.”Footnote ¹⁵⁰ But if the logic seemed similar—to exclude the other stakeholders in favor of a DG III–Industry agreement—things turned out very differently for pollution and CO₂ emissions standards, both set in 1998. Initially excluded from Auto-Oil I (1993–1996), NGOs took part in Auto-Oil II (1996–1998), which led to more demanding environmental standards than those envisaged by Auto-Oil I.Footnote ¹⁵¹ As this was a classic, formal form of legislation (directive), and not a voluntary agreement with industry, Parliament was able to influence the decision-making process. Rory Costello and Robert Thomson suggest that the co-decision procedure introduced by the Maastricht Treaty (1992) would have weakened the Commission.Footnote ¹⁵² But that is not the case when the classic legal framework is not applied. Members of the European Parliament (MEPs) tightened antipollution standards by increasing the number of amendments in line with NGOs—something they were unable to do with CO₂, as the legislation fell outside the co-decision framework. This difference in regulatory form can no doubt be explained by the importance attached to each issue by DG III decision-makers at the time: “any effort in the field of CO₂ takes second place to the requirements for reducing pollutant emissions and safety,” explained Richard Wright (DG III) to PSA representatives in 1996.Footnote ¹⁵³ This would explain why pollutant emissions and pedestrian safety were the subject of a directive in the 2000s, while CO₂ was the subject of a simple voluntary agreement.