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Carmakers are choking on blue-sky emission rules

Fight to cut emissions needs a more nuanced approach and standard-setters need to have realistic expectations

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A California car smog check centre; the number of carmakers that have fallen foul of their testing regimes raises the question of whether standards were too high in the first place.

Tokyo

MAZDA Motor Corp's struggle to save the internal combustion engine from extinction threatens to choke in a cloud of faulty emissions tests. It may not be the only casualty: The widening global emissions scandal perhaps says as much about badly designed standards as the failings of carmakers.

Mazda has eschewed the industry's rush to develop electric vehicles, seeking to prove the naysayers wrong by continuing to focus on conventional engines. The Japanese carmaker announced its intention last year to commercialise a next generation of internal combustion engines that would be 20 per cent to 30 per cent more fuel-efficient. Other companies had already lost hope of such a development. Investors cheered the plan.

On Thursday, however, the Japanese government said that Mazda, Suzuki Motor Corp and Yamaha Motor Co conducted fuel-economy or emissions checks on cars that fell short of the country's stringent testing standards. That brings the global count of carmakers that haven't been able to meet emissions requirements in their jurisdictions to at least seven, including Volkswagen AG, BMW AG and Nissan Motor Co.

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No doubt, the extent to which the companies fell short or cheated on tests varies greatly, as do the mechanisms used. The volume of recalls as a result will differ; profits, along with reputations, will be dented.

But the number of carmakers that have fallen foul of their testing regimes also raises the question of whether standards were too high in the first place.

Vehicles of all types account for about 20 per cent of global greenhouse gas emissions, according to the International Council on Clean Transportation (ICCT). Fuel economy standards in countries such as the US, South Korea and Japan have been in place for decades and historical performance data show that these regulations have worked, with carmakers typically tracking the minimum requirements. That might lead you to conclude that setting standards progressively higher is the way forward.

Not necessarily. A study by the ICCT last year showed a growing gap between official values and real-world carbon dioxide (CO2) values in all major markets. The divergence, the non-profit says, means that "laboratory measurements are increasingly overestimating the fuel efficiency of cars". In Japan, where requirements are the most stringent, the gap between those values is the greatest. Official CO2 levels in Japan are 115 grams per kilometre, while real levels are more like 168g/km. That compares with a difference of 46 grams per kilometre in the European Union. Admittedly, Japan's official and real-world CO2 levels are both the lowest globally. In 2013, it required fuel economy of 47 miles a gallon, compared to the global average of about 37 mpg, normalised to the US Corporate Average Fuel Economy standards, according to the ICCT.

Earlier this month, the Trump administration spurred outrage when it moved to ease fuel-economy standards set under former president Barack Obama. The government will freeze requirements at a fleet average of 37 mpg in 2020. Under the Obama rule, they would have risen gradually to about 47 mpg by 2025. Yet under the Trump rollback, carbon dioxide concentration in the Earth's atmosphere would rise by only 10 parts per million in about 90 years.

The air is getting dirtier and the summers hotter. So why not take a carrot and stick approach rather than just the stick?

More realistic tests are already being brought in. The Worldwide Harmonised Light Vehicle Test Procedure, for instance, is replacing an outdated inspection. For instance, this changes the test temperature to 23 degrees Celsius from a range of 20 to 30 degrees, and the speed to 46.5 kilometres per hour from 34. But these still don't address the growing divergence issues directly. The likes of Tata Motors Ltd's Jaguar Land Rover and Volkswagen are already dealing with the increased regulatory costs of the procedure. Broadly speaking, incentives could include more wide-scale electric car subsidies. Rather than pushing cost-conscious and highly competitive carmakers into cheating because of unrealistic standards, a more effective approach might be to force them to make electric vehicles a certain portion of their sales, while slowing the progression of fuel-economy standards. The reality is that green cars can grow only with capital and policy support in their initial stages. Nine countries account for about 80 per cent of the global car market, so a commitment of capital to clean-energy vehicles in that group would go a long way. Fiscal incentives helped the growth of hybrid vehicles in Japan that have contributed a huge share of the improvement in emissions.

Carmakers are under cost constraints as the pressure to make vehicles with new technology grows. To be sure, this doesn't excuse the culture of cheating. Evidence from more than 100 data sets suggested carmakers were skirting rules and manipulating emissions standards, the EU's commissioner for climate has said. Companies there could face fines of over US$16 billion if they don't comply with tighter regulations.

Rules are rules, but standard-setters need to have realistic expectations for an industry that's under increasing pressure from all sides. The fight to reduce auto emissions needs a more nuanced approach. BLOOMBERG

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