Automakers really don’t have much incentive to reduce emissions, at least not financially. Two main factors drive the development of automobiles with fewer emissions: legislation and the economy.
When the economy turns down or prices go up, there is a corresponding surge in sales of more economical vehicles, which reduce emissions. Legislation, on the other hand, requires that automakers make vehicles that have fewer emissions.
The problem with both of these is profits. New technology that reduces emissions without sacrificing engine power and vehicle performance, a nigh-impossible quest, is expensive. Vehicles with the new technologies are more expensive, which starts to push people away from them. The result is reduced profits.
In the EU, legislation already has set emissions goals of 130g/km carbon dioxide by 2015 and 95g/km by 2020, and the average across the entire EU right now is 132g/km. The 130g goal for 2015 isn’t that far off but, while the averages are good, the range is bad. Germany tops the charts at 147g/km but doesn’t want to make any changes, at least not that fast, to get down to the 130g/km goal by 2015.
Yes, we understand that innovation takes money, but it also makes money. According to recent studies by Ricardo-AEA and Cambridge Econometrics, innovation that reduces automotive emissions could save up to $108 billion, by 2030, in fuel savings alone. The study also concluded that up to 1.1 million jobs could be created in the same period of time, including any jobs lost in the petroleum sector due to reduced demand.
Germany, time to get on the ball and get those emissions down. Innovation is good for business, and taking a long-term view of things will bear that out.