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  • The ‘car chancellor’ should consider drivers and the environment too

    This Comment by Greg Archer was first published by EurActiv. The scandal of Germany’s heavy-handed attempts to block an agreed deal on CO2 standards for cars has sunk to new levels with news that BMW’s main shareholding family gifted €690,000 to Chancellor Merkel’s party. The badly timed donation came just a few days before she finally succeeded in pressuring Ireland and Portugal, and bribing the UK to take Germany’s side. Working in tandem with German carmakers (which used the leverage from their plants in Slovakia, the Czech Republic and Hungary) enough votes were secured to block the deal in a heated session of the Environment Council.

    The manipulation of the EU decision-making process (three votes were postponed before Germany secured sufficient support) raises serious questions about the ability of large businesses to distort the priorities of the most powerful government in Europe and the independence of the EU Presidency. Consumer and motoring organisations have highlighted that drivers will shoulder the price of weaker standards in higher fuel bills. EU families will have less disposable income to stimulate the moribund EU-economy, which at the same time will be forced to import more oil.

    Many EU countries are furious about the German heavy-handedness. The European Parliament is angry it is being asked to renegotiate an agreed deal. The automotive industry is split. The BMW gift has prompted German media to dub Merkel ‘the car chancellor’. Even many Germans are questioning whether the political establishment has grown too close to its car industry as evidenced by the revolving door between the top echelons of that sector in Germany and the government.

    The German car industry association (VDA) claims the regulation will be disastrous for jobs in the premium car industry, but the reality is entirely different. Daimler and BMW’s CO2 limits are 10-15% higher than those for makers of small cars like PSA Peugeot Citroën and Fiat. They are Europe’s most profitable carmakers, with the funds to invest in low-carbon technology. The additional cost of technology to achieve the carbon limit is a just a few per cent of the purchase price of their premium product.

    A range of studies, including one by Daimler, show the shift to more efficient vehicles will stimulate jobs as drivers spend less on fuel and companies invest in clean technology. What is more, the German car industry will meet 2015 targets ahead of schedule and is on track to achieve 2020 goals. Dan Becker, commenting recently in the New York Times, observed: ‘They say that German engineering is the best in the world, and if it’s half as good as they say it is, they can meet these standards.’

    The real motivation of the German car industry is two-fold: weaken the 2020 goal and neutralise the threat posed by the long-term global shift to more efficient cars. The EU law to drive more fuel-efficient cars is being replicated globally as other countries seek to lower burgeoning oil import bills. Sales in emerging markets, like China, of high-performance, fully equipped cars are highly profitable for premium carmakers. They are concerned margins will decline if regulations promote greater fuel efficiency and constrain sales of profitable gas-guzzlers.

    So, what is next in this saga? The Commission, Council and Parliament have all expressed a desire to retain the environmental integrity of the law. They also want a first-reading agreement, which should only involve minimal changes to the agreed deal and therefore cannot include new elements. Lithuania, which holds the EU presidency, has promised it will provide a Council position to Parliament by 30 November to be discussed at a joint meeting with the Commission and MEPs on 5 November.

    Germany only wants a first-reading agreement on its own terms and there are serious doubts over the impartiality of the Lithuanian Presidency that is sponsored by BMW. Lithuania has held no formal discussions in Council to agree on its negotiating mandate and is now instead suggesting delaying the full introduction of the target – a previous German phase-in proposal in addition to more generous allowances for selling electric cars (supercredits). In combination, the Lithuanian ideas severely weaken the environmental integrity of the previous agreement. The prospect of more backroom deals continues to cast a shadow over this blighted regulation and the Presidency must ensure there is an opportunity for all European countries to influence the debate.

    The Commission must also be far more effective in defending the environmental integrity of the agreed deal and brokering an acceptable compromise. MEPs need to continue to stand up for the deal they negotiated in June. They should insist there is no phase-in and that concessions to allow more flexibility are complemented by strengthening other areas of the regulation. Specifically, MEPs must insist a future review of the regulation commits to setting a 2025 target.  A first-reading deal in the next month is within reach but only if Germany shows a new willingness to compromise and there is genuine consensus building led by an independent Presidency.