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What is the 2040 10 rule for cars?

Reducing CO₂ emissions from heavy-duty vehicles

Lorries, buses and coaches are responsible for more than a quarter of GHG emissions from road transport in the EU, and for over 6% of total EU GHG emissions. Despite some improvements in fuel consumption efficiency in recent years, these emissions are still rising, mainly due to increasing road freight traffic,.

To fight the climate crisis, we need to bring down CO2 emissions in this field. To do so, the Commission is proposing new targets which will raise our ambition and meet the EU’s climate and zero pollution objectives while lowering demand for fossil fuels.

Raising our ambition

In 2023, the Commission proposed a revision of the Regulation on CO2 emission standards for heavy-duty vehicles. If adopted, the proposal would introduce new, stronger CO2 emission standards for heavy-duty vehicles from 2030 onwards, and extend the scope of the Regulation to cover smaller trucks, city buses, long-distance buses and trailers.

Previous targets: 2025 -15%, 2030 -30%. New targets: 2030 -45%, 2035 -65%, 2040 -90%.

To stimulate faster deployment of zero-emission buses in cities, the Commission also proposes to make all new city buses zero-emission as of 2030.

The new targets build on those adopted in 2019, which were the first-ever EU-wide CO2 emission standards for heavy-duty vehicles.

To enter into force, the Commission’s proposal now needs to be adopted by the European Parliament and the Council of the EU.

Main benefits

If adopted, our proposal will:

hdv_icon_decreaseDecrease CO2 emissions per km from new HDV by 90% by 2040, as compared to the reference period (1 July 2019 – 30 June 2020), with intermediate targets for 2030 (45%) and 2035 (65%)
hdv_icon_neutralityHelp reach the EU’s 2050 climate neutrality target and boost zero-emission mobility
hdv_icon_healthImprove air quality and health of Europeans by cutting the level of air pollutants, especially in towns and cities
hdv_icon_costReduce the fuel expenditure and total cost of ownership for transport operators and all users
hdv_icon_dependencyLower the EU’s energy dependency on imported fossil fuels, and enhance energy savings and efficiency in the transport sector
hdv_icon_industryProvide a clear signal to industry to pursue a zero-emission pathway by investing in innovative zero-emission technologies
hdv_icon_zeroIncrease the share of zero and low-emission vehicles in the market and accelerate the roll-out of recharging and refuelling infrastructure
hdv_icon_innovationStrengthen the technological and innovation leadership of industry in the EU and create new jobs

Regulation on CO₂ emission standards for heavy-duty vehicles

Until the revision is adopted, the Regulation on CO2 emission standards for heavy-duty vehicles applies. This Regulation entered into force on 14 August 2019.

As per the Regulation, from 2025 onwards, manufacturers will have to meet the targets set for the fleet-wide average CO2 emissions of their new lorries registered in a given calendar year. Stricter targets will start applying from 2030 on.

The targets are expressed as a percentage reduction of emissions compared to the EU average in the reference period (1 July 2019–30 June 2020):

  • From 2025 onwards: 15% reduction
  • From 2030 onwards: 30% reduction

The 2025 target can be achieved using technologies that are already available on the market. The 2030 target has been assessed as part of the review of the Regulation.

As a first step, the CO2 emission standards cover large lorries, which account for over 73% of all CO2 emissions from heavy-duty vehicles.

Incentive mechanism for zero- and low-emission vehicles (ZLEV)

The Regulation includes an incentive mechanism for

  • Zero-emission vehicles (ZEV), lorries without an internal combustion engine, or with an internal combustion engine that emits less than 1gCO2 per kWh or per km;
  • Low-emission vehicles (LEV), lorries with a technically permissible maximum laden mass of more than 16t, with CO2 emissions of less than half of the average CO2 emissions of all vehicles in its group registered in the 2019 reporting period.
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To incentivise the uptake of ZLEV and reward early action, a super-credits system applies from 2019 until 2024, and can be used to comply with the target in 2025. A multiplier of 2 applies for ZEV, and a multiplier between 1 and 2 applies for LEV, depending on their CO2 emissions. An overall cap of 3% is set to preserve the environmental integrity of the system.

From 2025 onwards, the super-credits system is replaced by a benchmark-based crediting system, with a benchmark set at 2%. The 2030 benchmark level will have to be set in the context of the 2022 review.

As a result, the average specific CO2 emissions of a manufacturer are adjusted downwards if the share of ZLEV in its entire new heavy-duty vehicles fleet exceeds the 2% benchmark, out of which at least 0.75 percentage points have to be vehicles subject to the CO2 targets, i.e. the largest vehicles. Each percentage point of exceedance of the benchmark will decrease the manufacturer’s average specific CO2 emissions by one percent.

In both systems, ZEV not subject to the CO2 targets are accounted in the incentive mechanism. Buses and coaches are excluded from the scheme. The ZEV not subject to the CO2 targets can contribute to a maximum of 1.5% CO2 emissions reduction.

Cost-effective achievement of targets

The Regulation includes several elements to support cost-effective implementation:

  • Banking and borrowing to take account of long production cycles, including a reward for early action, while maintaining the environmental integrity of the targets.
  • Full flexibility for manufacturers to balance emissions between the different groups of vehicles within their portfolio.
  • Vocational vehicles , such as garbage trucks and construction vehicles, are exempted due to their limited potential for cost-efficient CO2 reduction.


The following measures will ensure the effectiveness and enforcement of the targets. They are based on the experience from cars and vans :

  • Assess the robustness and representativeness of the reference CO2 emissions as a basis for calculating the EU fleet-wide emissions targets.
  • Collect, publish and monitor real-world fuel consumption data reported by manufacturers, based on mandatory standardised fuel consumption meters
  • Introduce in-service conformity tests and mandate the reporting of deviations and the introduction of a correction mechanism
  • Apply financial penalties in case of non-compliance with the CO2 targets. The level of the penalties is set to 4,250 euro per gCO2/tkm in 2025 and 6,800 euro per gCO2/tkm in 2030.

Monitoring and reporting of CO₂ emissions from heavy-duty vehicles

The following measures enable the implementation of the emission standards:

  • Certification Regulation on the determination of the CO2emissions and fuel consumption of new lorries
  • Regulation (EU) 2018/956 on monitoring and reporting

The monitoring and reporting Regulation mandates the following monitoring and reporting requirements (with data from 1 January 2019 onwards): :

  • Member States monitor and report to the Commission information on the heavy-duty vehicles registered for the first time in the Union;
  • Lorry manufacturers monitor and report to the Commission CO2 emission and fuel consumption data as determined pursuant to the certification Regulation for each new vehicle produced for the EU market. This information will be calculated using the Vehicle Energy Consumption Calculation Tool (VECTO).

The collected data on CO2 emissions and fuel consumption, together with other relevant technical information on the vehicles, including the aerodynamic drag, is made publicly available by the European Environment Agency on behalf of the Commission

The new system complements the existing EU reporting system for cars and vans.

Vehicle Energy Consumption Calculation Tool (VECTO)

VECTO is a simulation software that can be used cost-efficiently and reliably to measure the CO2 emissions and fuel consumption of heavy-duty vehicles for specific loads, fuels and mission profiles (e.g. long haul, regional delivery, urban delivery, etc.), based on input data from relevant vehicle components.

The tool has been developed by the Commission in close cooperation with stakeholders.

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What Is the 20/4/10 Rule for Car Buying?


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Article QuickTakes:

  • What is the 20/4/10 rule?
  • How does it work?
  • Putting it into practice
  • Potential drawbacks to the 20/4/10 rule
  • When to use or avoid the rule
  • Strategies to stay within your 20/4/10 budget

What is the 20/4/10 Rule?

This rule suggests you can afford a car if you can meet the following three requirements:

  • You can make a down payment of 20% or more when purchasing the car
  • You can take out a car loan with a term of four years or less
  • You can have your total transportation costs—not just your car loan—be less than 10% of your monthly income

In theory, this rule can help you in multiple ways. First, it makes sure you can afford a down payment on the car. This is important because new cars begin to depreciate when you drive them off the lot. Without a decent down payment, you may immediately end up upside down on your car loan.

A four-year car loan can help you limit the interest you pay because you’d pay off the loan relatively quickly. Finally, keeping your total transportation costs to less than 10% of your monthly income can help ensure a car doesn’t dominate your budget and leaves room for other expenses.

Remember this is only a guideline that can inform your decision. It’s impossible to make it fit every person’s situation. You may decide to spend more money on a car because it’s something you truly value or because you must have a reliable vehicle to keep a job. Others may decide to spend less on a car because they’d rather allocate their money elsewhere.

How the 20/4/10 Rule Works

Using this rule in practice requires some thought but isn’t difficult once you understand the process.

To start, you need to know the purchase price of a vehicle. This allows you to calculate how much a 20% down payment would be. Next, you can figure out how much you’d need to finance and get an estimated interest rate. Use this information to come up with the monthly loan payment, including interest costs.

Then, calculate the total transportation costs of a vehicle for a month as a percentage of your income. This is a bit trickier because it includes costs such as insurance, fuel, maintenance, and more. You can use a total cost of ownership calculator to estimate some of these expenses. You don’t need to include any depreciation costs, but you do need to include the car loan payment.

Finally, divide the total cost of the vehicle by your monthly income. The 20/4/10 rule doesn’t state if this should be your net income (after taxes and deductions) or your gross income (before taxes and deductions). You can use your best judgment or what fits your needs best.

Putting the Rule Into Practice

Here’s a hypothetical example: A person decides they want a $30,000 sedan. They calculate a 20% down payment would be $6,000. That leaves a balance of $24,000 to finance with a four-year loan at a 4.37% interest rate. This results in a monthly payment of about $546.

Next, they calculate other transportation costs. In this example, they may estimate monthly costs as follows:

  • Insurance: $57
  • Maintenance: $46
  • Taxes and fees: $25
  • Fuel: $129
  • Loan payment: $546

Based on this estimated information, the total cost of ownership per month would average out to $803 for this vehicle. According to the 20/4/10 rule, the individual’s monthly income would need to be $8,030 or higher to afford this payment.

Potential Drawbacks to the 20/4/10 Rule

It’s important to note that this rule is far from perfect. Unfortunately, it’s a longstanding rule that fails to consider the lack of significant wage growth compared to high inflation in the new car market. The U.S. household median income for 2010 was $49,276, which increased to $67,521 in 2020. This represents an increase of 37%. At the same time, the average price of a new car rose from $24,296 in 2010 to $40,107 at the end of 2020. That’s an increase of almost 61%.

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Rules like this don’t typically account for all situations, either. A car enthusiast may be willing to spend 20% of their income on a car and reduce their spending on housing by 10% of their income to offset that. Similarly, a family that would rather have a more expensive home may decide to buy a used car and only use 5% of their income on a car to put an extra 5% toward housing.

When to Use or Avoid the Rule

In general, this rule can help prevent you from overextending yourself when purchasing a car. For financially established individuals, it may make sense to consult this rule for a reasonability check before buying a car. Meanwhile, people on a limited income or those just getting started on their journey into adulthood may find this rule unreasonable. They may need to make adjustments—either up or down—to find a car that fits their needs and budget.

Strategies to Stay Within Your 20/4/10 Budget

If you want to stick to this rule, here are a few ideas that may help:

  • Make a larger down payment
  • Buy a base model rather than an upgraded model
  • Consider last year’s leftover new car inventory
  • Purchase a used car instead of a new car
  • Keep your current car longer and set aside what would be your monthly payment until you can save more for a better vehicle

This rule may make sense in your situation, or may be an outdated guideline that hasn’t kept up with your current reality. Considering the rule before making a purchase can help give you a quick reality check.

Bottom Line

The key is realizing only you know what you can afford. As long as your car purchase fits within your budget, you can use this rule of thumb as a guideline rather than a strict rule you must follow.

This site is for educational purposes only. The third parties listed are not affiliated with Capital One and are solely responsible for their opinions, products and services. Capital One does not provide, endorse or guarantee any third-party product, service, information or recommendation listed above. The information presented in this article is believed to be accurate at the time of publication, but is subject to change. The images shown are for illustration purposes only and may not be an exact representation of the product. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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I started reading everything I could about personal finance while I attended college. It turns out that was one of the smartest decisions I could have made. Now, I want to share that knowledge with you. Using what I’ve learned through my education and experience, I aim to help you make informed decisions throughout the car buying and lending process while saving money at the same time.

FACT SHEET: Biden- ⁠ Harris Administration Proposes New Standards to Protect Public Health that Will Save Consumers Money, and Increase Energy Security

Today, the Biden-Harris Administration is announcing new proposed vehicle pollution standards to make all vehicles, including gas-powered cars and heavy-duty trucks, cleaner and more efficient. The proposed standards would protect public health by cutting nearly 10 billion tons of CO2 emissions – twice the annual U.S. emissions today. They would also save consumers on average $12,000 over the lifetime of a vehicle. And they would strengthen American energy security by reducing reliance on 20 billion barrels of imported oil.

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Cars and truck manufacturers have made clear that the future of transportation is electric. The market is moving. Since President Biden took office, the private sector – including the American auto industry – has invested more than $120 billion in the American-made electric vehicle and battery supply chain. The United States can seize this moment to secure American leadership in the global race to a clean transportation future, or let competitors like China out-compete us for the jobs and investments building that future.

As a car enthusiast and self-proclaimed car guy, President Biden is seizing the moment. His Investing in America agenda is expanding domestic manufacturing and accelerating adoption of zero-emission vehicles (ZEV), including battery electric, plug-in hybrid electric, and fuel cell electric vehicles. This is bringing good-paying jobs back home and putting the United States on a bold path to out-compete China in securing the jobs and investments of the future.

The pollution standards proposed today by the Biden-Harris Administration will:

Spur Adoption of Pollution-Reducing Technology for Nearly All Road Vehicles

The Environmental Protection Agency today is proposing two new rules to improve public health and combat climate change that will also lower costs for families and create good-paying jobs. The first rule would target emissions of greenhouse gases and smog- and soot-forming pollutants from passenger cars, vans, and light trucks. The second rule would update vehicle emissions standards for greenhouse gas emissions from buses, freight trucks, and other heavy-duty vehicles. This rule builds on the final standards that EPA released in December 2022 for criteria pollutant emissions from heavy-duty vehicles.

The proposed updates would:

  • Protect Public Health. Through 2055, EPA projects that the proposed standards would avoid nearly 10 billion tons of CO2 emissions — equivalent to more than twice the annual U.S. CO2 emissions in 2022.
  • Lower Consumer Costs. By leveraging accelerated adoption of technologies that reduce fuel and maintenance costs alongside pollution, the proposed standards would save the average consumer $12,000 over the lifetime of the vehicle. The proposals would also result in approximately $12 billion in reduced reliance on oil imports. Rapid innovation in the automotive sector has driven down the cost of emissions-reducing technology and put us closer to a clean transportation sector.
  • Accelerate the Clean Vehicle Transition in Technology-Neutral Way. The EPA’s approach is technology-neutral, meaning that better-designed gas vehicles, hybrids, fuel cell vehicles, and other innovations could all be used to meet stricter standards. But with EV technology getting better and cheaper every day, and consumer demand rising rapidly, many manufacturers would likely rely on fully electric vehicles for compliance. EPA estimates that by 2032, if finalized, the proposed rules could result in electrification of 67% of new sedans, crossovers, SUVs, and light trucks; 50% of new vocational vehicles (such as buses and garbage trucks); 35% of new short-haul freight tractors; and 25% of new long-haul freight tractors.

Reinforce President Biden’s Investing in America Agenda to Continue Building a Clean Transportation Future Made in America

These standards build on the generational investments secured by the Biden-Harris Administration that will ensure our nation’s transportation systems are clean, affordable, equitable, and Made in America. In the first year of his Administration, President Biden set a goal that at least 50 percent of all new passenger cars and light trucks sold in 2030 be zero-emission vehicles. A year later, President Biden joined countries around the world in targeting that 100 percent of all new medium- and heavy-duty vehicles sold in 2040 be zero-emission vehicles, with an interim 30 percent sales target for these vehicles in 2030.

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The United States is making strong progress towards these goals. Under President Biden’s watch, the number of available electric models have doubled while the number of electric car sales have tripled. There are over 130,000 public chargers now available across the country – with all 50 states now implementing a historic federal investment to build a new national charging network. The iconic yellow school bus is going green and the U.S. Postal Service is shifting to fully electric. The private sector has committed more than $120 billion into the American-made electric vehicle and battery supply chain in the last two years alone. U.S. capacity to source the critical materials and inputs for this supply chain is also rapidly expanding. Through partnerships with unions and industry, the Administration is lifting up the workers who represent America’s competitive edge – and is ready to take on and tap into the massive economic opportunity embedded in this shift.

This extraordinary progress is propelled in large part by public and private investments made under President Biden’s leadership, including:

  • Nearly $25 billion through the Bipartisan Infrastructure Law to support clean transportation, including by building a national network of EV chargers and alternative-fuel stations; ensuring domestic manufacturers have the materials they need to make EV batteries; and funding clean transit and clean school buses, with priority for underserved communities.
  • $6 billion through the Inflation Reduction Act to directly support the clean-vehicle transition, including by extending loans to manufacture clean vehicles and their components in the United States; retooling domestic production lines for clean vehicles; and funding for Tribal, state, and local governments deploy clean heavy-duty vehicles, especially in nonattainment areas.
  • More than $120 billion of private investments in EVs and batteries in the United States since President Biden has taken office.

President Biden has also acted to ensure a seamless clean-vehicle transition that benefits all Americans, including by:

  • Securing tax credits that make new and previously owned clean vehicles more affordable to working families.
  • Setting national standards to make charging EVs convenient and reliable for all Americans – no matter what car you drive or which state you charge in.
  • Approving EV charging plans for all 50 states, D.C., and Puerto Rico, unlocking over $1.5 billion in initial funding to cover 75,000 miles of highways with Made-in-America EV chargers through the National Electric Vehicle Infrastructure (NEVI) program. DOT also has made available over $700 million in funding to deploy publicly accessible charging and alternative fueling infrastructure in communities across the country.
  • Awarding $2.8 billion in funding to 20 companies across 12 states to supercharge U.S. manufacturing of batteries and battery materials.
  • Encouraging companies, nonprofits, and others to expand community EV charging, increase consumer understanding about different types of clean transportation, and help consumers access clean-transportation benefits.
  • Establishing a Joint Office of Energy and Transportation to work hand-in-hand with States, industry leaders, manufacturers, and other stakeholders.
  • Releasing a Rural EV toolkit to help ensure all Americans, regardless of where they live, can benefit from the lower operating costs, reduced maintenance needs, and improved performance that EVs provide.
  • Activating the purchasing power of the federal government to procure 100 percent zero-emission light-duty vehicles by 2027 and all vehicles by 2035.
  • Launching pathbreaking partnerships, like the Department of Energy’s agreement with AFL-CIO to launch a national workforce development strategy for lithium-battery manufacturing, including pilot programs to train battery manufacturing workers and bolster the domestic battery supply chain.
  • Through the White House Talent Pipeline Challenge, International Brotherhood of Electrical Workers (IBEW) has certified 20,000 electricians through Registered Apprenticeships like the Electric Vehicle Infrastructure Training Program (EVITP).

Providing a clear pathway for a continued rise in EV sales and protecting future generations from the impacts of climate change is a win-win for all Americans.

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