PARIS, Dec 17 (Reuters) - The European Union is

tightening its rules on auto emissions from Jan. 1 as part of

broader targets to achieve climate neutrality in the region by

2050.

WHAT ARE THE TARGETS?

From Jan. 1, 2025 the average level of carbon dioxide (CO2)

emissions per kilometre for each new car sold should not exceed

93.6 grammes.

That is 19% lower than this year's target, says consultancy

Dataforce, which says 2024 targets would be equivalent to 116

g/km under the new system of measuring emissions.

Each manufacturer will be allocated specific targets based

on the EU rules that take into account the average mass of its

new vehicles.

Luxury carmakers, or "small volume" manufacturers, have

separate targets.

WHAT ARE THE EXPECTED FINES?

Manufacturers will be fined 95 euros ($99.97) for each g/km

in excess of their specific target on each new vehicle

registered.

Luca De Meo, Renault chief executive and chief of

the European Automobile Manufacturers' Association (ACEA), has

said the industry overall could be liable for around 15 billion

euros in fines next year.

Stellantis Europe chief Jean-Philippe Imparato

told Italian newspaper Milan Finanza last month that it faces

fines of as much as 3 billion euros if it can't comply.

But Barclays analysts consider Stellantis ( STLA ), BMW and

Renault to be better positioned than Ford, Mercedes

and Volkswagen, which have large CO2 gaps

to close.

Potential fines for non-compliance for Volkswagen alone

could be 1.5 billion to 4.7 billion euros in 2025, depending on

CO2 savings, according to brokerage Stifel.

WHAT CAN CARMAKERS DO TO ESCAPE POTENTIAL FINES?

Companies with lower EV sales can "pool" their emissions

with sector leaders, purchasing emissions credits from other

manufacturers to lower their overall averages.

Japan's Suzuki has signed a pooling agreement with

Geely-owned Volvo, a spokeswoman has said. Ford said

earlier this year it had purchased $3.8 billon of credits for

use in North America and Europe.

Many are also expected to offer discounts on their EVs to

boost sales. They could also increase the prices of their petrol

engine cars to make EVs look comparatively more appealing and

reduce sales of CO2 "bad actors" in their portfolio.

WHO STANDS TO BENEFIT?

Volvo is one of the furthest ahead in lowering overall

emissions, with a large share of its output made up of electric

vehicles and plug-in hybrids.

Tesla, and Chinese companies like BYD,

are also likely to be in a position to sell emissions credits to

poor performers. Credits could cost around 20 euros per excess

gramme of CO2, Barclays estimated in September, based on likely

supply and demand.

MIGHT THE TARGETS BE DELAYED OR CHANGED?

German Economy Minister Robert Habeck has called for a more

flexible approach to the targets, such as allowing carmakers to

offset possible fines in 2025 if they exceed their quotas for

2026 and 2027. In late September, he suggested pulling forward

the revision of emissions targets from 2026 to 2025.

ACEA chairman Luca de Meo told reporters in November he

hoped fines could be calculated across the five-year period to

2030, when emissions rules are due to be further tightened.

Austria, Bulgaria, the Czech Republic, Italy, Romania and

Slovakia are asking the Commission to bring forward to next year

a review due in 2026 on the EU's auto transition regulation.

The states also want the Commission to reduce fines for

non-compliant companies.

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