Volkswagen AG

Climate change oversight capability

Volkswagen is the only company assessed with a high-level of climate change expertise on its board. Board members include the former chair of the Intergovernmental Panel on Climate Change and the founding director of the UN Global Compact. By appointing climate experts to its highest decision-making body, Volkswagen demonstrates its commitment to decarbonisation and improves its likelihood of succeeding in a low-carbon economy.

Volkswagen is heavily investing in electric vehicles, indicating its commitment to developing low-carbon technologies and replacing conventional high-emitting internal combustion engine drivetrains. The company will invest €34 billion (equivalent to approximately US$37.4 billion) in electric mobility by the end of 2022 and has recently announced a €900 million investment in a joint venture with Northvolt to provide batteries for its fleet of 40 percent electric vehicles scheduled for 2030.

Time horizon

Auto manufacturers should ideally set long-term targets that extend beyond the lifetime of their vehicles, punctuated with short and medium-term targets to incentivise action in the present. The average lifetime of vehicles sold in Volkswagen’s primary sales regions – China and Europe – is approximately 15 years. However, the time horizons of Volkswagen’s emissions reductions targets are too short, with the longest end date set at 2025. By increasing the time horizons of its emissions reductions targets, Volkswagen could better align itself with the low-carbon pathway.

Alignment of fleet emissions reduction targets

Volkswagen set a fleet emissions reduction target that covers its European passenger vehicles, based on European regulations. However, these vehicles account for only around 40 percent of Volkswagen’s total fleet emissions, rather than 95 percent as set for the low-carbon pathway. Volkswagen could better align itself with the industry’s pathway by increasing the scope of its fleet emissions target to cover all of its sales regions.

Low-carbon vehicle share

Volkswagen’s share of sales from low-carbon vehicle is considerably low, especially compared to its European competitors. While Volkswagen aims to be an electric mobility leader and to have a fleet of vehicles that is 40 percent electric – namely battery electric and plug-in hybrid vehicles – by 2030, the rate of sales growth is well below the target set for the low-carbon pathway. Volkswagen should increase its sales of electric vehicles to ensure success in a low-carbon economy

Volkswagen’s current manufacturing emissions fail to achieve the year-on-year decrease that is required for the low-carbon pathway. Moreover, Volkswagen’s commitment to cut its manufacturing emissions in half by 2025 still does not meet the low-carbon pathway. Volkswagen should further reduce its manufacturing emissions to become better prepared for a low-carbon economy.

Volkswagen aims to be carbon neutral by 2050 and a leader in electric mobility.

Volkswagen has plans to electrify its vehicle portfolio. By 2028, the company will release 70 electric vehicle models. By 2030, 40 percent of Volkswagen’s fleet will be electric. The company will also reduce its manufacturing emissions by transitioning from fossil fuels to renewable energy.

Volkswagen’s share of sales from low-carbon vehicles is low. However, the company has made considerable investments in electrification and battery development.

Volkswagen’s legacy has been tainted by its involvement in the 2015 emissions scandal. The company’s fleet emissions have decreased at the rate required by the low-carbon pathway, primarily due to gains in conventional engine efficiency.

Volkswagen has a clear vision for the company’s place in a low-carbon economy as a carbon neutral, electric mobility leader. However, this vision is not matched by ambitious, low-carbon targets. Moreover, figures for the share of sales from low-carbon vehicles are too low. Volkswagen has recently made significant investments towards electrifying its portfolio which suggests it is on the right track to better align itself with the low-carbon pathway.