“ticking carbon bomb:” legacy carmakers massively understate carbon emissions

Source: Unsplash

Carmakers have been caught out significantly under-reporting the emissions caused by the use of fuel and distances travelled by the cars they make.

The new figures call into question to what extent car companies can be considered “green investment,” and lays out the huge extent to which carmakers are covering up the impact their activities have on climate change.

For example, the report found that investing in the Renault-Nissan-Mitsubishi alliance is three times worse than investing in oil companies. Toyota on the other hand bases the average lifetime emissions of its cars on just 100,000km.

Emissions generated by the manufacture of cars are on average 50% higher than what carmakers report, clean transport lobby Transport & Environment (T&E) has found, calling the practice a “ticking carbon bomb” ahead of mandatory Scope 3 emissions reporting.

A new report published by T&E released on Wednesday concluded that car manufacturers are “significantly underestimating” the total distance travelled and fuel consumption of their cars.

Hyundai-Kia, BMW and Toyota worst offenders

It says carmakers’ global emissions are on average 50% higher than reported. At the top of the list are South Korean Hyundai-Kia and Germany’s BMW which underreport global emissions levels by as much as 115% and 80% respectively. Toyota under-reported by 69%, Mercedes-Benz by 62%, the R-N-M alliance by 61% and VW by 58%.

“ticking carbon bomb:” legacy carmakers massively understate carbon emissions

Image Credit: T&E

And, with mandatory scope 3 (lifetime) emissions reporting due to begin in 2023 in Europe, asset managers and investors with exposure to carbon-intensive carmakers may need to reassess which companies they invest in or purchase cars from – or go electric.

Legacy carmakers don’t qualify as green investment

“For green investing to be effective, we need accurate data,” said Luca Bonaccorsi, director of sustainable finance at T&E.

“Carmakers are trying to pull the wool over investors’ eyes by underreporting the lifetime emissions of their cars. This makes a mockery of carmakers’ green claims.”

Of particular concern is the risk asset managers face when the European Union will require financial institutions to begin disclosing their scope 3 emissions, also known as indirect emissions.  For asset managers investing in carmakers, and with 98% of a car company’s emissions being emitted under scope 3 – in other words, through the lifetime use of the car – the risk of such a “carbon bomb” is high.

Carmakers already report comparatively high scope 3 emissions, as compared to other sectors. But T&E claim that the way in which carmakers base their total reported emissions are significantly underestimating the total distance travelled and fuel consumption of their cars.

Specifically, carmakers are reportedly basing their total reported emissions on a number of selective factors. Factors include the average size of the vehicles, where the cars are driven, and the car’s lifespan, all so as to reach a lower figure.

For example, according to T&E, Toyota bases the lifetime average emissions of its vehicles on only 100,000 kilometres driven.

Fossil fuel car companies as bad as oil industry

T&E subsequently conclude that, from an investment perspective, car companies are almost as carbon-intensive as the oil industry.

“At today’s prices, €1 million invested in an average of oil giants Exxon Mobil, BP and Shell finances around 5,000 tonnes of CO2 equivalent (CO2e),” T&E explain. “The same amount finances more than 4,500 tCO2e in the car sector.”

And, in some cases, the carbon intensity of some carmakers is significantly higher than the oil giants. For example, for those investing in Renault-Nissan-Mitsubishi, €1 million finances nearly 10,000 tonnes of CO2e, and 7,000 tonnes for Honda.

“ticking carbon bomb:” legacy carmakers massively understate carbon emissions

Image Credit: T&E

“According to official disclosures, a euro invested in a car company finances virtually the same amount of carbon as a euro in an oil company,” said Luca Bonaccorsi.

“This should be a wakeup call for the financial industry. Asset managers wanting to avoid a ticking carbon bomb will have to start ditching carmakers that continue to sell polluting cars.”

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