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Under the European Union’s Voluntary Agreement with car manufacturers, average light-vehicle CO2 emissions in 2004 were 12.4% below 1995 levels but appeared unlikely to achieve the 25% reduction needed to reach the 140 g/km target for “per vehicle” CO2 emissions for 2008. The EU is now considering a regulatory approach to further reduce average vehicle emissions, in the form of CO2 emission or fuel economy standards. Such standards have been used by a number of countries, including the United States (although US standards have been little altered since their 1975 promulgation), Japan, China, and several others; and those that have been in existence for some time - e.g. in the United States and Japan – have been successful in achieving their targeted levels of new vehicle fuel economy.
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In developed countries, transport generates approximately 25-30% of emissions of CO2, the main greenhouse gas (GHG), and these emissions are increasing sharply. There are two explanations for the increase in emissions from transport: the first is dependency on the internal combustion engine for transport with no wide-scale, economically viable alternative available in the medium term; the second is the sharp increase in vehicle-kilometres travelled, which seems to be an inherent feature of economic development.
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Motor vehicles have been recognized as an important contributor to air quality problems for over 40 years, almost as long as air pollution itself has been considered a public health problem instead of simply a nuisance.
Attempts to control mobile emissions began in the United States, Japan and northern Europe around 1970, amid growing concerns about unhealthy air. Until about a decade ago, direct public health impacts were the focus of auto emissions policies, which were designed to reduce emissions of the so-called “conventional” pollutants, carbon monoxide (CO), volatile organic compounds (VOCs), oxides of nitrogen (NOx) and lead, substances that either alone or upon reaction with other pollutants can cause respiratory disease, elevated cardiovascular disease risk, high blood pressure, photochemical smog formation, reduced visibility and acid deposition. Of these, the most serious (and fortunately the easiest to deal with) was lead, an additive that raised octane levels in gasoline. Today, gasoline is leadfree in most of the developed world and is being steadily phased out almost everywhere else.
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Among economists and policymakers more generally, a fuel efficiency standard for cars and the fuel tax have been the subject of extensive debate. The major benefits from stricter fuel efficiency standards and higher fuel taxes are the reduction of greenhouse gas emissions and the reduced oil dependence. The major costs are the increased production cost, the reduced comfort and the negative impact on mileage-related externalities (congestion, accidents) due to the rebound effect.