Germany confirms end of combustion engine era – but doesn’t say how

November 26, 2021

What the country’s coalition agreement really means for transport

On Wednesday, the much anticipated German coalition agreement – signed by the centre-left SPD, the Greens and the liberal FDP – was finally published, signalling the end of the combustion engine era in the birthplace of the technology. 

Two months of negotiations and 178 pages later, the agreement sets the direction of travel for Europe’s largest economy and, to an extent, for the bloc itself.

The coalition agreed to a number of environmental measures including a coal phase-out, “ideally” by 2030 (eight years earlier than initially expected) and a push to increase renewable energy capacity to 80% of the country’s electricity mix by 2030. 

While many expected to see the Greens at the helm of the transport ministry, it was the Liberals who took the role. The FDP swiftly announced that Volker Wissing, previously minister for transport in the western state of Rhineland Palatinate, would take charge. 



The three parties agreed to support the EU’s proposal to end the sale of new petrol and diesel vehicles before 2035 – a boost to two of the country’s big carmakers, Volkswagen Group and Daimler, which have grand ambitions to electrify and can meet the deadline. The new government would like to see 15 million electric cars on German roads by 2030, but this falls short of the 21 million projected by T&E and Prognos, if Germany is to meet its decarbonisation targets on transport.

The small print, T&E points out, is a cause for concern. The deal will allow the use of synthetic fuels in internal combustion engines (ICE), which are being touted by the oil industry and engine suppliers as a way to perpetuate the combustion engine. A study by T&E showed that conventional cars running on e-fuels consistently emit more CO2 than equivalent battery-electric cars and e-fuel production also requires five times as much energy as direct electrification. 

“The text is not entirely clear. On the one hand, the agreement pledges support for the Commission proposal which requires 100% emission-free car sales by 2035. On the other hand, there is talk of allowances for e-fuel powered cars outside the remit of the CO2 standards. How this would be implemented is unclear,” says Stef Cornelis, director of T&E Germany.



On EV infrastructure, the coalition will maintain its current goal of 1 million charging spots by 2030. They have also stated that they would depend on private investment to fund the roll-out. 



One of the most disappointing aspects of the agreement concerns company cars, T&E finds. The new treaty maintains the existing system of generous tax breaks for diesel and petrol company cars and foresees an increase in company car taxes for EVs from 0.25% to 0.5% from 2025. 

“This treaty essentially continues the EV policy of the outgoing government: nothing is being done to make the ICE more expensive. If the coalition is serious about their goal of 15 million EVs by 2030, they must do better. This is particularly true for company cars which represent 63% of car sales and are still largely fossil fueled. A few tweaks to company car taxes would make a major contribution to Germany’s quest to become the world’s leading EV nation. This should be a top priority for the Klimaschutz Sofortprogramm (Climate Action Plan) to be implemented in 2022,” Cornelis explains. 



On trucks, the government will vary truck charges by CO2 emissions in 2023, for all trucks over 3.5 tonnes (currently, the threshold is 7.5 tonnes). There would also be a CO2 charge for trucks, a first in Europe. This is a move in the right direction, says T&E. 



The coalition has announced that it will invest considerably more on rail than road, while shifting road investment to maintenance, not expansion, a move welcomed by T&E. The plans include ‘rapid capacity expansion’ to enhance railway infrastructure and the development of night train services. Rail freight transport is set to increase to 25% by 2030.



For aviation, the government hopes to become a ‘leader in CO2-neutral aviation’. To achieve this Berlin will support ambitious Power-to-liquid (PtL) quotas, enabling an increase in production of green hydrogen. 

The coalition will push for EU legislation to establish a minimum price for plane tickets within the bloc, as long as there is no EU-wide consensus on kerosene taxation. Revenues from aviation tax will be used to boost the take-up of e-fuels and promote the modernisation of aircraft technology. Yet, the incoming government will not increase the domestic air traffic ticket tax until after 2023. 

“If the new government wants to be a champion for carbon-neutral aviation, they will need to readjust their hydrogen strategy as a whole. Scaling up e-kerosene production for aviation is a must, while bringing the costs down. This applies for shipping as well,” explains Jekaterina Boening, senior policy manager at T&E Germany. 

Green hydrogen and its derivatives should be used primarily in those sectors of the economy where it is not possible to convert to greenhouse gas neutrality using direct electrification, says T&E. And while the coalition treaty acknowledges this, its ambiguous stance on synthetic fuels for cars leaves its priorities unclear.



Finally, the mention of shipping is limited in the agreement. As with aviation, the government will support ambitious PtL quotas to stimulate a market ramp-up.Berlin will support alternative ship engines, and in ports the use of electricity will be promoted. The coalition will supposedly “keep an eye” on the overall burden of Fit for 55 for shipping companies, but offers no further details.

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