UK: Clean Road Vehicles - Lifetime Costs In Public Procurement Agreed

Recent announcements of President Obama requesting an urgent review of a policy preventing US states from imposing stricter vehicle emissions standards and the ordering of the enforcement of existing fuel-efficiency law co-incide with continued EU efforts to spearhead transport targeted regulation in order to effect change. This update relates to specific changes in public purchasing of road transport vehicles.

In July 2008 we provided details of the European Commission's (the "Commission") revised proposal for a Directive on the Promotion of Clean and Energy Efficient Road Transport Vehicles (COM(2007)817) (see link to previous article here). The revised proposal aimed to introduce energy consumption, CO2 and pollutant emissions as mandatory award criteria in the costs of the public purchasing of road transport vehicles.

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Recent announcements of President Obama requesting an urgent review of a policy preventing US states from imposing stricter vehicle emissions standards and the ordering of the enforcement of existing fuel-efficiency law co-incide with continued EU efforts to spearhead transport targeted regulation in order to effect change. This update relates to specific changes in public purchasing of road transport vehicles.

In July 2008 we provided details of the European Commission's (the "Commission") revised proposal for a Directive on the Promotion of Clean and Energy Efficient Road Transport Vehicles (COM(2007)817) (see link to previous article here). The revised proposal aimed to introduce energy consumption, CO2 and pollutant emissions as mandatory award criteria in the costs of the public purchasing of road transport vehicles.

On 22 October 2008 the European Parliament adopted a legislative resolution amending the revised proposal following a compromise with the Council of the European Union. As a result, within 18 months of the Directive becoming law (anticipated by around September 2010), operational lifetime energy and environmental impacts must be taken into account either by (i) setting technical specifications for energy and environmental performance or (ii) by including energy and environmental impacts in the purchasing decision as award criteria. This article covers the key changes.

The Directive, once implemented, could have a substantial impact on the vehicle market and bring about a fundamental change in approach to procurement in this area.

Key changes

• The text adopted by the European Parliament contains an express recital stating that the aim of the Directive is to stimulate the market for clean and energy efficient vehicles. The Directive aims to influence the market for standardised vehicles produced in larger quantities such as passenger cars, buses, coaches and trucks by ensuring a level of demand which is sufficiently substantial to encourage manufacturers and industry to invest in and further develop vehicles with low energy consumption, CO2 emissions and pollutant emissions
• The Directive covers road transport vehicles purchased by:-

In other words the Directive applies to road transport vehicles purchased by contracting authorities or entities, whether public or private, where particular procurement procedures apply, and road transport vehicles bought for performing particular passenger transport service contracts.

• "Road transport vehicles" encompasses passenger cars, light commercial vehicles, heavy goods vehicles and buses
• Vehicles designed and constructed for special use including for example civil defence, armed services, fire and public order services and port or airport facilities which are not subject to type or individual approval may be exempted
• In order to properly take account of energy consumption, CO2 emissions and pollutant emissions, contracting authorities, contracting entitles and operators covered by the Directive must either:

• Both options are intended to ensure the monetisation of impacts with harmonised methodology. A Commission example illustration of how operational lifetime costs would be applied to the purchase of vehicles with emission standards EURO IV (bus) and EURO 4 (car) is as follows:-

to view an example.

• The fuel consumption will be counted in units of energy consumption per kilometre. These units are set out in the Directive
  The lifetime cost of the energy consumption, CO2 emissions and pollutant emissions must take account of any mileage already performed
• The costs related to CO2 emissions are to be factored in at a price of 3-4€cents per kg or the EU Emissions Trading System market price whichever is higher rather than 2€cents/kg previously proposed by the Commission. A recital to the Directive states that the Commission , assisted by a Committee should, be able to adapt these values to inflation and technical progress of the data for the calculation.
  The range for the energy content of natural gas/biogas has been amended to 33-38 MJ/NM3
• Where monetisation takes place values ascribed for calculating emissions costs are minimum values and authorities may use up to twice the stated value
• The Commission must facilitate and establish exchange of knowledge and best practices between Member States for the promotion of the purchase of clean and energy efficient vehicles by those affected by the Directive
• The Commission is obliged to prepare a report on the application of the Directive and the actions taken by Member States to procure the purchase of clean and energy efficient road transport vehicles. The report must compare the nominal and relative figures of vehicles purchased corresponding to the best market alternative in terms of lifetime energy and environmental impacts to the overall market and estimate how the options have affected the market, the need for further action. The report must include proposals as appropriate
• Within 2 years of implementation the Commission must examine the ways of factoring lifetime costs into the purchase of vehicles pursuant to the Directive and evaluate the methodology regarding monetisation and propose appropriate adjustments where necessary
• Member States are to implement the Directive into national law 18 months after the Directive enters into force. The Directive is expected to enter into force around March 2009

Other changes rejected

A number of suggested changes have not been implemented such as the requirement for manufacturers of road transport vehicles to provide indicative data for total lifetime energy consumption, CO2 emissions and pollutant emissions when the vehicles are offered for sale or for the Commission to develop a European Climate Protection Fund to encourage the purchase of clean and energy efficient road transport vehicles by procuring authorities and operators

Expected impact

The European Parliament expects the Directive to create sufficient demand to prompt industry to invest in and develop clean vehicles. On a cost benefit analysis the Commission has identified a net gain from savings in energy consumption and lower overall lifetime costs. There is also a perceived benefit in a potential decrease in the cost of public transport and in the cost of health care and climate change mitigation.

The Directive may not only impact the new vehicle market but also the second hand market and asset valuation given that vehicles which have higher energy consumption or emissions may appear less attractive on resale or hire.

Next steps

The Directive is expected to become law around March 2009.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 11/02/2009.