5 steps the EU can take to create a circular economy for cars

While vehicles provide economic and societal benefits, they come with a sizeable carbon footprint. The European Green Deal is a chance for car manufacturers to make their processes more circular, write Maya Ben Dror and Tilmann Vahle.

Maya Ben Dror is the Lead on Shaping the Future of Mobility at the World Economic Forum. Tilmann Vahle is the Lead on Circular Mobility Solutions at SYSTEMIQ. Both authors are involved in the Circular Cars Initiative, a World Economic Forum project.

The automotive industry is a driver of Europe’s economic value creation, competitive sovereignty, and societal wellbeing. But road transport is also responsible for 20% of Europe’s greenhouse gas emissions, and emissions from vehicles’ materials are expected to account for 60% of the total vehicle lifecycle emissions by 2040.

The European Green Deal provides a unique opportunity for the European automotive value chain to accelerate the transition to a resource-efficient, low-carbon and competitive future.

However, setting the right level of ambition and placing the supply chain on an attainable path to sustainability requires close public-private collaboration. The automotive sector can support it by accelerating the use of circular materials, higher value-retention processes, and improving the utilisation of vehicles.

With such a challenging task at hand, what should be the policy priorities of collaboration over the coming months?

There are five key opportunities for immediate actions in a new report, which according to European Commissioner Vălean provides a timely and compelling case that will inform and inspire EU-level policy-making.

Setting stringent and enforceable CO2 standards

Passenger cars and vans are respectively responsible for around 12% and 2.5% of total EU emissions of carbon dioxide (CO2), which is the main greenhouse gas. Since Europe introduced a CO2 regulation in 2010, with a CO2 target of 95 g/km by 2020, sales of electric cars (EVs) have surged beyond even the most optimistic forecasts.

EV sales reached over 10% of total car sales in 2020 and are expected to hit 15% in 2021. However, over the past few years the pace of average emissions reduction per manufacturer declined. Faster decarbonisation of the transport sector is key to achieve the EU climate goals and a 1.5°C Paris aligned economy.

A new study from the International Council for Cleaner Transportation (ICCT), an environmental think tank, notes that stronger EU CO2 emissions standards for passenger cars are technically feasible and will result in cost savings for consumers.

The Circular Cars Initiative European policy paper proposes to first revise CO2 emission performance standards for cars and vans in line with the updated EU climate targets and require standardised, lifecycle-based CO2 assessment disclosure for vehicles, to prepare the legislation for full vehicle lifecycle emission incorporation in the future.

A focused effort on urban mobility transitions

Europe’s urban mobility accounts for 40% of all its CO2 emissions of road transport and up to 70% of other pollutants from transport.

The European Commission has set up institutional structures to support an iterative urban mobility transition among member states, and dedicated pilot projects for exploring the best way forward, such as the EC’s urban access regulation (also known as ReVeAl).

Furthermore, the EU Urban Mobility Package recently entered a new consultation round. However, EU tools for effectively supporting sustainable urban mobility systems have been found insufficient.

Therefore, the EU should use the Urban Mobility Package’s revision as an opportunity to expand the EU’s toolbox for supporting sustainable mobility. This includes providing guidance for national legal frameworks, implementing high-occupancy vehicle access regulations, and developing appropriate pricing systems that reflect sustainability in mobility offers.

Standing firm on an ambitious battery regulation

Last December, the European Commission published its proposal for a revision to the Battery Directive 2006/66/EC which aims to ensure that all stages of a battery’s lifecycle correspond to the ambitious goals of the Circular Economy action plan.

The Circular Cars Initiative underscores that this regulation, especially if implemented in its ambitious form, could become the world’s first ever sustainable battery law, underpinning the development of a green and competitive transition to electric mobility.

In particular, the Initiative calls for increasing ambition levels in recovery quota for lithium and upholding the requirement for battery carbon footprint disclosure to set the foundations for vehicle lifecycle-based assessments.

End-of-life directive for vehicles

Entering into force already two decades ago, Europe’s End-of-Life vehicle directive aimed to ensure safe and environmentally sound production, recollection, dismantling and disposal of end-of-life vehicles.

Among others, it prohibits the use of certain hazardous substances when manufacturing new vehicles and sets targets for recycling vehicles. However, the regulation has not been entirely successful as an estimated 35% of all vehicles in the EU are considered of unknown whereabouts at their end of life, and high-value recovery of materials used in vehicles remains elusive.

Instead, this rule for vehicles must be revised with a lifecycle perspective and improved data transparency. It should include targets for higher-value-retention processes (e.g. remanufacturing), recovery targets differentiated by material type and quality, carefully balanced content quotas for recycled materials, and well-functioning vehicle (de)-registration systems.

Given the transition to new supply chains with the transition to zero tailpipe emission drivetrains, and the increase in current car park replacement rate, the window of opportunity to shape the footprint of end-of-life is now.

Establish digital product passports and a European data space for mobility

Along the process, there is a need to support the establishment of efficient, standardised data-sharing for material lifecycle management. This can be achieved through digital product passports and shared mobility.

Several integrated multimodal transport applications already exist, and many private and public mobility providers already collaborate on making their service data accessible across platforms.

As part of the European Green Deal and Mobility Data Space, this approach can be formulised and mainstreamed.

A recent example is the European Green Digital Coalition, that already houses mobility service providers. Another one is the creation of the Battery Passport, which has been enshrined in the Battery Regulation draft and will be required for all vehicle batteries coming into service starting 2026.

Both now need to be developed and shaped with a sustainable and circular automotive value chain in mind.