The real cost of Germany blocking the car engine ban

Julia Poliscanova — March 24, 2023

What are the wider implications of Chancellor Scholz's u-turn?

Back in 2013, I was a pink-spectacled advisor in the European Parliament working on a law to set the CO2 standard for cars sold from 2020. Pretty much all car sales were combustion, and reaching even a few percent of electric sales was questioned by every major carmaker.   

After tough negotiations, the agreement to adopt the 95g CO2 per km standard was reached. All parties, including Germany, signed off on the compromise. We all went on summer holidays feeling happy the deal was done. We came back to surprising demands from Europe’s governments to go back and renegotiate. 

Allegedly, pressure from at least one German carmaker prompted the then chancellor, Angela Merkel, to call up a few heads of state to get support to reopen the deal and give more leeway to carmakers. The end result was that the 95g target was delayed to 2021.  

Fast forward a decade, and a similar fall-out is happening again. As I experience deja vu, I ask myself has anything really changed? A lot has. 

Close to a fifth of all new cars sold in Europe now have a plug. 

And this time the assault on Europe’s most important law to reduce emissions from road transport is led not by a conservative government, but by the self-proclaimed German “climate chancellor”, Olaf Scholz. Under pressure from the Free Democrats – a pro-business minority partner in his coalition government – Germany is blocking the agreement being signed off at European level, something which should have been a mere formality. 

First, at stake is not whether “e-fuels” are a solution. We know that synthetic fuels do not yet exist in meaningful qualities, nor will they in the next decade. Even when available, their price will be unaffordable to anybody not driving a Porsche. Concessions on those fuels have already been made, including a promise to look at them separately and review the cars law again in 2026. 

What is at stake is the future of Europe’s automotive industry and our wider industrial fabric. As China and the US compete in the clean tech race – with battery supply chains at the heart of it – Europe is losing precious time scrambling to accommodate a niche solution. 

Volkswagen is just the latest company to confirm that it’s planning to build a battery factory in North America. Our analysis shows that almost two-thirds of Europe’s battery plans are at risk of being disrupted or cancelled. Getting into a subsidies race is hard, but Europe has more tools than just money to capture investment. The 2035 engine phase-out signals to the industry that the world’s largest market is going electric. That counts for a lot. 

Ultimately, this is about Europe’s climate credibility and the standing of the German government among its European partners. If 5% of Germans (the Free Democrats’ current support base) can so easily hold Europe’s climate agenda hostage, other governments facing pressure back home might want to re-open the climate agreements they don’t like. At stake is not just the European Green Deal falling apart, but the entire way of Europe’s decision-making. 

The energy transition will be hard, it will require transforming supply chains, supporting workers and being honest about trade-offs. But the only way Europe can succeed is for European leaders to stay united. The German chancellor should sign off on the cars deal.

First published in Euractiv

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