Germany leans on EU states to weaken car emissions law

BRUSSELS Tue Jun 18, 2013 1:48pm BST

A car produces smoke from its exhaust as it pulls away in Guernica October 29,2007. REUTERS/Vincent West

A car produces smoke from its exhaust as it pulls away in Guernica October 29,2007.

Credit: Reuters/Vincent West

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BRUSSELS (Reuters) - Senior members of the German government have warned EU member states that German automakers could scale back or scrap production plans in their countries unless they support weakened carbon emissions rules, according to diplomatic sources.

With EU governments and lawmakers aiming to finalize the rules next week, which most of the 27 member states back, Germany has stepped up the pressure on them to water down limits on vehicle emissions to protect the country's mighty car industry, particularly luxury makers such as BMW and Daimler.

The sources added that some calls warning EU member states of possible consequences have come from members of Chancellor Angela Merkel's office.

Her office declined to comment.

One EU diplomat said Berlin had reminded Lisbon of Portugal's 78 billion euro ($100 billion) euro zone bailout, which was heavily financed by Germany, in its bid to convince the country to drop its opposition to softer limits.

"They have tried everything at the highest level to pressure member states, in particular countries in the bailout club, to support their proposals," said the diplomat, who spoke on condition of anonymity.

"Germany seems hell-bent on pressing its interests. Even countries that are generally pro-German feel that they are going too far."

A German government source denied that Berlin had put particular pressure on countries that have received EU financial aid, and said its aim was to protect jobs in the EU auto sector.

"Our strategy is to focus on France, Britain and Italy as the big car producing countries, and on the countries which have important supply industries," the source said.

"They should all be together in this fight. We should not drive jobs out of Europe at a moment of high unemployment."

Germany's position is backed by a handful of central European countries with domestic auto production, but France, Britain and Italy are opposed, EU sources say.

ISOLATED

The proposal from the European Commission, the EU's executive, would set a goal of 95 grams of carbon dioxide per kilometer (g/km) as an average for all new vehicles sold in Europe from 2020.

Each manufacturer is assigned an individual target to take account of the nature of their fleet and their record of past cuts.

But making less-polluting cars is costly and restricts profit margins, which is why major German manufacturers want to delay the stricter rules.

The legal changes demanded by Berlin would allow luxury makers to continue selling more powerful - and profitable - models in Europe after 2020, when the new EU emission limits will take effect.

Under the plan, carmakers would be allowed to carry over credits to pollute that were accrued before the new rules kick in.

Known as supercredits, these permits are earned if manufacturers make some very low emissions vehicles, such as electric cars, which German firms are making to meet a separate national target.

The problem is that if they manage to hold on to a glut of supercredits, they can carry on making higher emissions models, and emissions levels will fail to meet the 2020 95 g/km target.

An internal European Commission document, seen by Reuters, on the latest German proposal says its plan "could result in a net increase in greenhouse gas emissions, increased oil and fuel use and reduced energy security".

Germany and its carmakers say the flexibility they want is essential for spurring innovation, but critics say the changes amount to major loopholes in the rules.

An EU source said the German proposal would delay achievement of the 95 g/km target until 2023 for those carmakers who made use of the accrued credits.

No-one from BMW was immediately available for comment. A spokesman for Daimler denied the company had played any part in any threats, direct or indirect, made to EU member states.

CRYING WOLF

In the past, the car industry has exaggerated the difficulty of EU targets, environmentalists say, and they need to innovate to find ways to cut emissions to stay ahead of a global trend.

The United States has agreed fuel efficiency standards, though they lag Europe, while China, where smog has stirred social unrest, is increasingly aware of the implications of vehicle emissions for air pollution.

In 2008, after dire predictions of factory closures and mass job losses, the European Union agreed a limit of 130 g/km to be phased in between 2012 and 2015.

Average emissions were already down to 132.2 g/km in 2012, the EU's European Environment Agency said, meaning the target is on course to be met early, prompting accusations that the industry cried wolf in order to weaken the rules.

Germany as a whole is at the upper end of the EU emissions range, with emissions of 147 g/km in 2011, according to the non-profit International Council on Clean Transportation (ICCT).

At the lower end are nations including the Netherlands, which has given tax breaks for fuel-efficient vehicles, and Denmark, which has led a wider push for energy efficiency.

($1 = 0.7496 euros)

(Additional reporting by Laurence Frost in Paris, Andreas Rinke and Andreas Cremer in Berlin and Christiaan Hetzner in Frankfurt; Editing by Will Waterman)

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