The need for decarbonization of the automotive industry is clear: The European Green Deal set 2050 as the target date to reach net-zero greenhouse gas (GHG) emissions, and transportation is the second largest contributor to global carbon dioxide (CO2) emissions after the power sector.

The fact that the European Union agreed on the use of e-fuels in passenger cars by 2035 as part of the Revision of CO2 Emission Performance Standards for Cars and Vans underlines its clear goal of having zero-emissions vehicles on the European market by 2035.

Automotive original equipment manufacturers (OEMs) will be required to electrify their fleets or use e-fuels produced with renewable energy to comply with the regulation. Some European OEMs have already announced that they will be fully electric earlier than the target year set by the EU, which shows the market’s commitment.

Looking at the standard life cycle of a current, state-of-the-art passenger car with 200,000 kilometers of lifetime mileage, around 70% of emissions are currently happening in the use phase of the car and are regulated by tailpipe policies/tailpipe emission thresholds as part of the CO2 emission performance standard. The new agreement and the implementation of the Revision of CO2 Emission Performance Standards for Cars and Vans will lead to a shift in the emissions hotspots within the life cycle of a vehicle.

The Need for Greater OEM Supply Chain Transparency

The bulk of emissions will eventually occur in the production phase of the vehicle, as well as through electricity generation and e-fuels production. Therefore, regulators will need another tool to regulate the automotive industry and to holistically account for the environmental impacts of the transport sector.

Acknowledging this fact, the Commission has already outlined the need for a life cycle-based approach. In the proposal, it stated that the Commission should come up with “a common EU methodology for lifecycle assessment of CO2 emissions of cars and vans, as well as for the fuels and energy consumed by these vehicles.” Although the outcome of this is not clear yet, it shows that the EU is moving toward a more life cycle-based regulation.

A first glimpse of this in the automotive sector is the battery regulation that mandates carbon footprint reporting by 2024 and applies a maximum emissions threshold for imported batteries by 2027.

When looking at a way to comply with the regulations of the EU, it becomes obvious that OEMs will need to look outside of their direct sphere of influence. We estimate that around 75 to 85% of life cycle emissions of a conventional combustion engine car are currently under the direct influence of the OEM (internal production and fuel consumption – the performance of the car).

With the use of battery electric vehicles and the long-term decarbonization of the electricity sector, the share of directly controlled life cycle emissions for OEMs will shrink to around 10%. The majority of the emissions will be allocated downward to the supply chain of the OEM. This illustrates the need to gain transparency in the carbon emissions of the supply chain.

Applying Life Cycle Thinking to Accelerate Decarbonization

To comprehensively quantify emissions, assess reduction possibilities and track decarbonization progress, automotive OEMs and suppliers alike need to implement life cycle thinking and get access to reliable supply chain data.

The life cycle assessment (LCA) standards ISO 14040, 14044 or 14067 (guidelines for product carbon footprint calculation) provide actors in the automotive sector with scientifically sound and commonly accepted guidelines for assessing emissions along the life cycle of their products. On the other hand, these standards lack dedicated rules for the specific methodological characteristics of a specific industry sector.

Several sector initiatives are currently developing and publishing sector-specific standards. This includes work being done in the chemical industry, as well as for steel, aluminum and batteries materials. Additionally, two overarching initiatives are focusing on the actual automotive supply chain: the A-PACT pathfinder network from the World Business Council for Sustainable Development (WBCSD) and the Catena-X initiative.

These initiatives aim to create transparency in automotive supply chains and build on a collaborative approach between automotive OEMs and their suppliers. To hold suppliers accountable for their emissions impacts, they are required to provide primary carbon footprint data for their products on a more frequent basis.

While this approach can result in more comprehensive data on the environmental performance of the supplied products, it’s also quite resource-intensive and difficult to scale, especially for companies with a large number of suppliers.

GlossaryWhat is Life Cycle Assessment (LCA)?
A Life Cycle Assessment (LCA) is defined as the systematic analysis of the potential environmental impacts of products or services during their entire life cycle. During a Life Cycle Assessment, you evaluate the potential environmental impacts throughout the entire life cycle of a product (production, distribution, use and end-of-life phases) or service.

How to Drive a More Sustainable Future

A more efficient alternative and a good starting point to gain transparency and accountability for supply chain emissions is to use LCA data from industry-based life cycle impact assessment (LCIA) databases. Governed by ISO 14044, these datasets provide granular GHG emissions data for understanding the cradle-to-grave impacts of a product or process, from extraction of raw materials through processing and production to distribution.

With a data-driven strategy, companies can establish accurate baselines and more effectively identify potential reduction levers. Using high-quality secondary emissions data from LCA databases promotes constructive discussions with suppliers, paving the way for collaborative decarbonization efforts and a more sustainable future.

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