Business Maverick

Business Maverick

Germany, Italy Protest Strict EU Plan for Combustion-Engine Ban

Germany, Italy Protest Strict EU Plan for Combustion-Engine Ban
An employee inspects a Renault Twingo automobile in an overhead conveyor cradle on the production line at the Renault Revoz d.d. plant, a unit of Renault SA, in Novo Mesto, Slovenia, on Wednesday, Nov. 16, 2022. Renault last week presented a radical overhaul plan to investors, proceeding with a complex split of Renault's electric-vehicle and combustion-engine businesses. Photographer: Oliver Bunic/Bloomberg

Germany and Italy are threatening to block a European Union ban on new combustion-engine cars, putting its green goals at risk if they don’t obtain a compromise.

Germany is demanding the EU executive come up with a proposal to exempt vehicles that use climate-neutral synthetic fuels, while Italy is broadly opposed to the regulation. The plan requires carmakers to reach a zero-emissions target by 2035.

The EU’s combustion-engine ban is already far along in the bloc’s internal deliberations, and overruling a deal made between lawmakers and member states at this late stage would be unlikely as politically toxic, with a vote next week normally seen as a rubber stamp. A preliminary deliberation by EU officials on the issue due Wednesday was postponed to Friday.

Push for Reassurances

Germany is pushing for reassurances from the European Commission that it will come up with a proposal on how e-fuels can be used in new combustion engine cars after 2035. It’s not clear when it would like such a proposal — likely to be technical — given the narrow timeline for a deal before EU elections next year.

But an assurance from the commission, such as a statement or declaration, could be enough to stop Germany from abstaining. Poland and Hungary have signaled their opposition to the 2035 plan.

German Transport Minister Volker Wissing said Wednesday that the commission had failed to deliver the proposal, so the government in Berlin is unable to give its approval for the wider plan in a final vote by EU government ministers due March 7.

“We need e-fuels as there is no alternative if we want to operate our vehicle fleet in a climate-neutral way,” Wissing said in an interview with public broadcaster ARD.

“Whoever is serious about climate-neutral mobility must keep all technological options open and also use them,” he added. “I don’t understand this fight against the car and why people want to ban some technologies.”

Chancellor Olaf Scholz’s chief spokesman Steffen Hebestreit backed Wissing’s demand that the commission provide a proposal on how new vehicles using exclusively e-fuels can be registered after 2035. “The commission should act quickly in this respect,” Hebestreit told reporters, dispelling any impression that the transport minister was acting without the support of the ruling coalition in Berlin.

Germany successfully lobbied for a loophole in the rules, under which the commission agreed to make a proposal for registering vehicles running exclusively on CO2-neutral fuel after 2035.

Industry’s Weight

The German automotive industry makes up roughly 5% of the nation’s economy and employs more than 800,000 people. The sector includes scores of specialized parts-makers that have developed over the course of more than a century of supplying carmakers including BMW AG, Mercedes Benz and Volkswagen with components for their combustion-engine cars.

In Italy, the auto industry contributes about 8.5% to the economy, employing about a quarter of a million workers.

Italy’s right-wing government led by Giorgia Meloni is critical of the plans to ban new combustion-engine cars. Deputy Premier and Transport Minister Matteo Salvini said that such a plan “makes no sense” and puts thousands of jobs at risk.

Europe’s automotive lobby group said it is “carefully” monitoring the discussions on the ban and is confident the legislative process will take its course. Spiraling inflation and the price of batteries increasing for the first time in over a decade mean affordability risks becoming a “bigger obstacle” in the transition to zero-emissions, the Brussels-based group ACEA said in emailed comments in response to a Bloomberg query.

“Policy makers must therefore also address emissions from the existing fleet of vehicles on the road,” ACEA said. “At the end of the day, it is all about slashing emissions, not about getting rid of a technology. As the current energy crisis demonstrates, diversification is essential to improve Europe’s resilience.”

EU Target

An EU spokesperson said that a transition to zero-emission vehicles was absolutely necessary to meet the bloc’s target of cutting emissions by 55% by the end of the decade — on the path to climate neutrality by the middle of the century. Road transport is one of the most carbon-intensive sectors in the EU, generating about a fifth of the bloc’s emissions.

Automakers have already moved well down the path of an all-electric future with unprecedented investments into the battery supply chain and new models.

While sales of electric cars are taking off, concerns over patchy charging times and comparatively high costs of an EV haven’t dissipated with Stellantis NV Chief Executive Officer Carlos Tavares warning of deep upheaval if consumers no longer have access to affordable vehicles. EVs are also less complex to make, triggering job cuts.

As carmakers ploughed billions into electrification, their approaches differed. BMW has stuck with a plan to offer buyers globally a range of technologies, including combustion-engine cars and hydrogen fuel-cells because of expected differences in regulation and uptake.

Concerns about the EU’s push have surfaced elsewhere too with Internal Market Commissioner Thierry Breton in November urging manufacturers to keep making combustion cars that help create quality jobs and drive exports.

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Germany’s Wissing is a member of the pro-business Free Democratic Party, the most junior member of Scholz’s three-party coalition, and his latest comments prompted some pushback from elsewhere in the ruling alliance.

The FDP has been trying to raise its profile in the government in recent months following a series of poor performances in regional elections and amid waning support in voter polls.

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