1. Eco-innovations Credits in the proposed EU CO 2 legislation for 2012 Anders Kärrberg Executive Director Governmental Affairs Volvo Car Corporation

2. What is an eco-innovation? Technical innovations that reduce CO 2 outside the homologation test cycle are additional to the Commission´s list of complementary measures* give CO 2 credits at the individual car level are approved by an independent and authorized process * gear-shift indicators (GSI), energy-efficient air-conditioning (MAC), low rolling resistance tyres (LRRT), tyre pressure monitoring systems (TPMS)

3. Why credit eco-innovations? Industry innovations should not be limited by closed list of defined eco-innovations – stimulates further innovations. CO 2 reductions are reached more cost efficiently both for industry and car customer

4. Examples of eco-innovations

5. Fuel economy indicator 1 % ACEA Adaptive cruise control3-12 % Dutch study, AMS Off-cycle CO 2 reduction Source

6. Adaptive Cruise Control

7. Examples of eco-innovations Fuel economy indicator 1 % ACEA Adaptive cruise control3-12 % Dutch study, AMS Eco-mode button3-6 % ACEA Bi-Xenon or LED lights1,5 % Magneti Marelli Off-cycle CO 2 reduction Source

8. Reduced electrical energy consumption vs traditional bulbs, in particular in countries requiring daylight running lights Reduced heat generation -> reduced maintenance Contributes to reduce size (and weight) of the alternator LED – Light Emitting Diode

9. Examples of eco-innovations Fuel economy indicator 1 % ACEA Adaptive cruise control3-12 % Dutch study, AMS Eco-mode button3-6 % ACEA Bi-Xenon or LED lights1,5 % Magneti Marelli High efficiency alternator2 % VALEO Flexible fuel vehicles (E85)30-80 % (wtw) EUCAR/JRC/Concawe Off-cycle CO 2 reduction Source

10. Why credit flexible fuel vehicles? Facilitates major off-cycle CO 2 reductions 30-80% w-t-w (EUCAR) 65% (EPA of Sweden) Reduces dependency on oil in transport sector (97%) Insurance against possible future oil price peaks and shortages

11. How to credit flexible fuel vehicles? Proposal: 5% reduction of the homologated CO 2 -value ~ technology cost for E85 compatibility @ Euro5 Increase to 20% when 10% of the filling stations in a country offers E85 that meets the EU sustainability criteria

12. Flexible fuel vehicles Market share development in Sweden 20,5% % 0 5 10 15 20 25 30 12/2004 2/20054/20056/20058/2005 10/200512/2005 2/20064/20066/20068/2006 10/200612/2006 2/20074/20076/20078/2007 10/200712/2007 2/20084/2008

13. Benefits from flexible fuel vehicles in Sweden At current growth rate, flexible fuel cars will by 2015 annually reduce CO 2 by 2 Million tons*. Assumptions: - 50% flexfuel market share of new cars sales - 30% of the car park flexfuel capable, - with today´s car technology - with today´s 1st gen production technology for sugarcane feedstock - with today´s E85 fuel usage level - petrol cars are displaced

14. Benefits from flexible fuel vehicles in Sweden At current growth rate, flexible fuel cars will by 2015 annually reduce CO 2 by 2 Million tons*. Corresponding CO 2 reduction from only E10 low blending is ~ 700.000 tons. Assumptions: - 50% flexfuel market share of new cars sales - 30% of the car park flexfuel capable, - with today´s car technology - with today´s 1st gen production technology for sugarcane feedstock - with today´s E85 fuel usage level.

15. Benefits from flexible fuel vehicles in Sweden At current growth rate, flexible fuel cars will by 2015 annually reduce CO 2 by 2 Million tons*. Corresponding CO 2 reduction from only E10 low blending is ~ 700.000 tons. We should do both. Assumptions: - 50% flexfuel market share of new cars sales - 30% of the car park flexfuel capable, - with today´s car technology - with today´s 1st gen production technology for sugarcane feedstock - with today´s E85 fuel usage level.

16. Summary Accept the concept of eco-innovations In the proposed CO2 legislation, reward CO 2 reductions from eco-innovations by reducing certified CO 2 values at individual car level. Accept flexfuel cars as an eco-innovation Reward flexfuel cars by 5% reduction of cert CO2 20% once sustainable E85 fuel is available